Archive for the ‘Regulatory Studies’ Category
Big Business Not Investing
In a recent post, I argued that while third-quarter GDP was positive, the underlying data revealed that U.S. private investment was still in the toilet. While government spending might be providing a short-term “sugar high” for the economy, U.S. business investment remains in recession. I speculated that Obama’s anti-business agenda is likely one cause of the problem.
For those observations, economist Brad DeLong called me an “utter fool.”
Let me draw your attention to an article in the Washington Post today entitled “Corporate giants sit on piles of cash.” Nucor Steel is sitting on piles of cash that it is unwilling to invest. Nucor’s chief executive Daniel Dimicco explains:
Everything is still on hold because we don’t have a lot of confidence that the right things are being done in Washington to reinvigorate the economy.
To story goes on:
Nucor isn’t alone. The balance sheets of large U.S. corporations are for the most part in good shape. Many big companies have piles of cash on hand and credit markets have thawed so that they can raise new funds… But most U.S. executives lack enough confidence in the economy to expand their businesses.
Filed under: Government and Politics; Regulatory Studies; Tax and Budget Policy
The Real Story Behind the Chrysler Bankruptcy
If you worry about the abuse of executive power and declining respect among elected officials for the rule of law, you should watch this eloquent illumination of what really went down in the Chrysler bankruptcy earlier this year. The speaker is Richard Mourdock, Treasurer of the state of Indiana. The setting is a Cato Institute policy forum on October 15 about the “sordid details of the Bush/Obama auto industry intervention.”
As state treasurer, Mourdock is the person responsible for investment decisions concerning Indiana’s state employee pension funds, some of which owned a small share of Chrysler’s $6.9 billion in secured debt and some of which opposed the administration’s offer of $.29 on the dollar for that debt. Though these small secured holders were publicly castigated by President Obama as “unpatriotic” and unwilling to sacrifice for the greater good, Mourdock led the effort to stop the “sale” of Chrysler all the way to the U.S. Supreme Court.
Mourdock’s presentation gives a flavor for the tactics employed by the Obama administration to “encourage” senior, priority creditors to back off their claims so that chosen parties could take priority—tactics that included backroom reminders that some of those creditors had received and might seek more TARP funding, threats of bringing the full weight and measure of the White House press office to bear down on dissenters, public condemnation, and other forms of arm-twisting most Americans would find unseemly for a U.S. presidential administration.
Filed under: General; Government and Politics; Regulatory Studies; Tax and Budget Policy; Trade and Immigration
Online Privacy and the Commerce Clause
I fear that with the PATRIOT Act on the brain, I’ve been remiss in continuing the colloquy on behavioral ads and privacy regulation that I’d been having with Jim Harper—who flattered me by responding in a long and thoughtful essay a couple weeks back. Because there’s so much interesting stuff there, I hope he won’t mind if I restrict myself to the first part of his reply here, in the interest of making this all a bit more digestible to those whose fascination with the topic may not be quite as consuming as ours. I’ll consider briefly the constitutional issue Jim raises, and turn to some of the specifics of the issue—and the relative merits of the common law alternative—in another post.
So like every good dorm room bull session, we begin in the weeds of policy and quickly find ourselves breathing the rarefied air of constitutional theory. Supposing for the moment that we thought it were a good idea on policy grounds, would it be within the power of Congress to set ground rules for online advertisers who gather personal data from Web browsers? Recall that there are two particular rules that I’ve said I’d be tentatively open to, but which Jim rejects: a requirement of notice when information is being collected (say via a small link from the adspace to a privacy policy) and a rule establishing that privacy policies are enforceable, so that individual users can sue for damages if a company knowingly violates its stated policy (thus far, courts have not generally found these to be binding). Does this fall within the power to “regulate commerce … among the several states”? I think so. I’ll start with what I hope will be some uncontroversial arguments and go from there.
Filed under: Law and Civil Liberties; Regulatory Studies; Telecom, Internet & Information Policy
What Is Regulation?
The New York Times tries to spin the work of Nobel laureates Elinor Ostrom and Oliver Williamson as not anti-regulation:
Neither Ms. Ostrom nor Mr. Williamson has argued against regulation. Quite the contrary, their work found that people in business adopt for themselves numerous forms of regulation and rules of behavior — called “governance” in economic jargon — doing so independently of government or without being told to do so by corporate bosses.
But none of us “anti-regulation” folks are against “rules of behavior that people in business adopt for themselves independently of government.” The world is full of rules, from wearing clothes in the office to customary trade practices to the rules for managing common-pool resources that Ostrom studied. Anyone who opposed such “forms of regulation” wouldn’t be a libertarian or even an anarchist — he’d be a nihilist. (Of course, one could sensibly oppose particular rules; but no one seriously wants a world without rules of behavior.)
David Henderson analyzes one of the misunderstandings about the laureates’ findings:
Some have summarized their work by saying that institutions other than free markets often work well. But that statement can mislead you to conclude that government solutions are the answer. Free markets are only a subset of free institutions. A better way to sum up their work is that what Ms. Ostrom and Mr. Willamson really show is that voluntary associations work.
The Concise Encyclopedia of Economics defines “regulation” this way: “Regulation consists of requirements the government imposes on private firms and individuals to achieve government’s purposes.” That’s the kind of regulation that is controversial among economists and often criticized by libertarians. It is entirely different from “rules of behavior that people in business adopt for themselves independently of government.” Those sorts of rules — often called “governance,” as the New York Times notes — are private and voluntary, made by the voluntary interactions of a few or many people.
The work of Ostrom and Williamson supports the idea of spontaneous order, an order that emerges as result of the voluntary activities of individuals and not through the commands of government. Spontaneous order can be hard to grasp, though it is the background of our entire world — language, common law, money, and the economy are all spontaneous orders (though government has intruded into some of those orders). It’s misleading to say that work of Ostrom and Williamson is somehow supportive of “regulation,” given the way that word is commonly used.
Sheldon Richman made a similar point back in June and wrote a Facebook note on the same paragraph that caught my eye.
Filed under: General; Political Philosophy; Regulatory Studies
Your Choices Are Unacceptable
Through my work on agriculture, I get occasional media calls on obesity and the agri-industrial complex supposedly behind it. On Sunday, for example, I gave an interview on NPR about the USDA’s push for — and subsidisation of — farmers markets and “eating locally” as the solution to poor nutrition. (This a recurrent theme of the Obama administration: Michelle Obama has made people’s food habits her business, growing a White House Garden and driving in a convoy of 36 vehicles to the H Street farmers’ market in a photo-op to promote it. The USDA even has a “People’s Garden“.)
So an article in today’s New York Times caught my eye. According to a recent study, the push for calorie postings in restaurants has had no affect on people’s eating habits in certain low-income areas of New York City. People’s choices are, apparently, pretty impermeable to the information that nutrition and public health advocates assured us was the key to better choices.
You would be forgiven for thinking that was the end of the matter and we could go on eating what we like unharassed. Think again:
“I think it does show us that labels are not enough,” Brian Elbel, an assistant professor at the New York University School of Medicine and the lead author of the study, said in an interview.
I hope I’m not coming across as hyperbolic, but I find it difficult to believe that healthy eating advocates will be content to accept that people are making choices, unpalatable though they may be to the ”slow food” movement, based on the benefits and costs of the alternatives available to them. If people won’t voluntarily submit to the food police — even when information is available — then I suspect calls for regulation will soon follow.
(HT: Radley Balko)
Filed under: Health, Welfare & Entitlements; Regulatory Studies
Nanny State Doesn’t Like Competition – the English Version
A previous post by David Boaz poked fun at bureaucrats in Michigan for threatening a woman for the ostensible crime of keeping an eye on her neighbors’ kids without a government permit. English bureaucrats are equally clueless, badgering two women who take turns caring for each other’s kids. The common theme, of course, is that bureaucrats lack common sense — but the real lesson is that this is the inevitable consequence of government intervention (especially when politicians say they are “doing it for the children). The BBC reports:
England’s Children’s Minister wants a review of the case of two police officers told they were breaking the law, caring for each other’s children.
Ofsted said the arrangement contravened the Childcare Act because it lasted for longer than two hours a day, and constituted receiving “a reward”.
It said the women would have to be registered as childminders.
…Ms Shepherd, who serves with Thames Valley Police, recalled: “A lady came to the front door and she identified herself as being from Ofsted. She said a complaint had been made that I was illegally childminding.
“I was just shocked – I thought they were a bit confused about the arrangement between us. So I invited her in and told her situation – the arrangement between Lucy and I – and I was shocked when she told me I was breaking the law.”
…Minister for Children, Schools and Families Vernon Coaker insisted the Childcare Act 2006 was in place “to ensure the safety and wellbeing of all children”.
Filed under: Government and Politics; International Economics and Development; Regulatory Studies
Keeping Your Doctor Will Be as Easy as 1, 2, 3…1,788, 1789, 1,790
This simple little chart shows the steps needed to keep your doctor if the health care plan put forth by Senator Baucus becomes law. For a closer look, click this link.
Filed under: Government and Politics; Health, Welfare & Entitlements; Regulatory Studies
Online Privacy and Regulation by Default
My colleague Jim Harper and I have been having a friendly internal argument about Internet privacy regulation that strikes me as having potential implications for other contexts, so I thought I might as well pick it up here in case it’s of interest to anyone else. Unsurprisingly, neither of us are particularly sanguine about elaborate regulatory schemes—and I’m sympathetic to the general tenor of his recent post on the topic. But unlike Jim, as I recently wrote here, I can think of two rules that might be appropriate: A notice requirement that says third-party trackers must provide a link to an ordinary-language explanation of what information is being collected, and for what purpose, combined with a clear rule making those stated privacy policies enforceable in court. Jim regards this as paternalistic meddling with online markets; I regard it as establishing the conditions for the smooth functioning of a market. What do those differences come down to?
Filed under: Regulatory Studies; Telecom, Internet & Information Policy
Reform Needed, but Obama Plan Would Result in More Financial Crises, not Less
Today President Obama took his financial reform plan to the airwaves. While there is no doubt our financial system is in need of financial reform, the President’s plan would make bailouts a permanent feature of the regulatory landscape. Rather than ending “too big to fail” — the President wants us to believe that with additional discretion and power, the same Federal Reserve that missed the boat last time will save us next time.
The truth is that the President’s plan will result in a small number of companies being viewed by debtholders as “too big to fail”. These companies would see their funding costs decline, allowing them to gain market-share at the expense of their rivals, making these firms even larger. Greater concentration in our financial services industry is the last thing we need, yet the Obama plan all but guarantees it.
Obama also chooses myth’s over facts. The President claims that de-regulation and competition among regulators caused the crisis. The facts could not be more different. Those institutions at the center of the crisis — Fannie Mae, Freddie Mac, Bear Stearns, Lehman –could not choose their regulator.
The President’s plan chooses convenient targets and protects entrenched interests, rather than address the true underlying causes of the crisis. At no time have we heard the President discuss the expansionary monetary policies that helped fuel the bubble. Nor has the President talked about the global imbalances — the global savings glut that poured surplus savings from the rest of the world into the US. But then the President appears to hope that loose monetary policy and continued American consumption funded by China will get him out of his own political problems with the economy. It is especially striking that the President makes little mention of the housing bubble, as if it was only the bust that was the problem.
The President continues to say he inherited this crisis. While true, he did not inherit the same individuals — Tim Geithner and Ben Bernanke — who were at the center of creating the crisis. All Obama needs to do is find a position for Hank Paulson and he will have completely re-assembled the Bush financial team.
Without real reform — fixing Fannie and Freddie, scaling back the massive subsidies for leverage in our tax code, loose monetary policy – it will only be a matter of time before the next crisis hits. If we implement the President’s plan, we will, however, guarantee that the next crisis will be even larger and severe than the current one.
Filed under: Finance, Banking & Monetary Policy; Regulatory Studies
We’re Terribly Czarry
My former colleague Dave Weigel makes the excellent point that the supposed explosion of “Czars” under this administration is, in significant part, a function of journalists trying to make the same old “deputy undersecretary” sound sexier. Which is a shame, since it means that the pernicious and the benign get lumped together under the same sensationalist label — one whose public effect is to normalize the idea of unaccountable individuals within the executive branch given sweeping powers to solve specific problems, whether or not that picture is accurate.
I don’t know how much it can be attributed to the Czarmania, but I’m especially puzzled by the apparent emergence of legal scholar and prospective OIRA Adminstrator Cass Sunstein as the new hot bogeyman for conservatives. The Office of Information and Regulatory Affairs, which Sunstein’s been tapped to head, was created in 1980 and is precisely the sort of agency conservatives should love — tasked with catching inefficient and excessively burdensome regulations before they go into effect. It has, unsurprisingly, been most active under conservative presidents, and is one of the few offices where fans of limited government should want a vigorous, influential, and intellectually formidable director at the helm.
Now, Cass Sunstein is not somebody I agree with on a great number of things. On the day he’s tapped for a seat on the Supreme Court bench, I’ll break out in hives. But it’s awfully hard to imagine any realistic alternative — anyone Obama might actually have appointed — who would be better in the OIRA post from a limited government perspective. (I considered some of the specific concerns being raised about Sunstein back in the spring and found that they ranged from exaggerated to simply mendacious.) That’s one reason hardcore progressives have, in fact, been freaking out over his nomination. They must be pinching themselves now that it seems Glenn Beck is out to do their work for them. Say what you will about the tenets of “libertarian paternalism,” but at least it’s an ethos that would demand a far lighter touch on markets than the unreconstructed technocracy of your average regulator.
Picture Don Draper Stamping on a Human Face, Forever
Last week, a coalition of 10 privacy and consumer groups sent letters to Congress advocating legislation to regulate behavioral tracking and advertising, a phrase that actually describes a broad range of practices used by online marketers to monitor and profile Web users for the purpose of delivering targeted ads. While several friends at the Tech Liberation Front have already weighed in on the proposal in broad terms — in a nutshell: they don’t like it — I think it’s worth taking a look at some of the specific concerns raised and remedies proposed. Some of the former strike me as being more serious than the TLF folks allow, but many of the latter seem conspicuously ill-tailored to their ends.
First, while it’s certainly true that there are privacy advocates who seem incapable of grasping that not all rational people place an equally high premium on anonymity, it strikes me as unduly dismissive to suggest, as Berin Szoka does, that it’s inherently elitist or condescending to question whether most users are making informed choices about their privacy. If you’re a reasonably tech-savvy reader, you probably know something about conventional browser cookies, how they can be used by advertisers to create a trail of your travels across the Internet, and how you can limit this. But how much do you know about Flash cookies? Did you know about the old CSS hack I can use to infer the contents of your browser history even without tracking cookies? And that’s without getting really tricksy. If you knew all those things, congratulations, you’re an enormous geek too — but normal people don’t. And indeed, polls suggest that people generally hold a variety of false beliefs about common online commercial privacy practices. Proof, you might say, that people just don’t care that much about privacy or they’d be attending more scrupulously to Web privacy policies — except this turns out to impose a significant economic cost in itself.
The truth is, if we were dealing with a frictionless Coaseian market of fully-informed users, regulation would not be necessary, but it would not be especially harmful either, because users who currently allow themselves to be tracked would all gladly opt in. In the real world, though, behavioral economics suggests that defaults matter quite a lot: Making informed privacy choices can be costly, and while an opt-out regime will probably yield tracking of some who would prefer not to be under conditions of full information and frictionless choice, an opt-in regime will likely prevent tracking of folks who don’t object to tracking. And preventing that tracking also has real social costs, as Berin and Adam Thierer have taken pains to point out. In particular, it merits emphasis that behavioral advertising is regarded by many as providing a viable business model for online journalism, where contextual advertising tends not to work very well: There aren’t a lot of obvious products to tie in to an important investigative story about municipal corruption. Either way, though, the outcome is shaped by the default rule about the level of monitoring users are presumed to consent to. So which set of defaults ought we to prefer?
Filed under: Regulatory Studies; Telecom, Internet & Information Policy
Medium Tobacco Fights Back
The New York Times has an editorial today titled “Big Tobacco Fights Back,” criticizing tobacco companies’ lawsuit against new advertising restrictions. Repeatedly, the Times attributes the lawsuit to “the [tobacco] industry.”
But as my former Cato colleague Jacob Grier notes, the biggest tobacco company (Philip Morris) is on the Times’s side in opposing the lawsuit. So wouldn’t it make more sense to title the editorial “Medium-Size Tobacco Fights Back”?
Lighting for People, not Politics
Unfortunately, there are many good (and sad) examples of Uncle Sam’s insatiable desire to regulate the smallest aspects of our lives. Legislators can’t even let us decide which light bulbs to buy. Government believes that it knows best, and is banning the venerable incandescent bulb.
Lighting consultant Howard Brandston makes a plaintive plea for lighting that serves people rather than politics:
The Energy Independence and Security Act of 2007 will effectively phase out incandescent light bulbs by 2012-2014 in favor of compact fluorescent lamps, or CFLs. Other countries around the world have passed similar legislation to ban most incandescents.
Will some energy be saved? Probably. The problem is this benefit will be more than offset by rampant dissatisfaction with lighting. We are not talking about giving up a small luxury for the greater good. We are talking about compromising light. Light is fundamental. And light is obviously for people, not buildings. The primary objective in the design of any space is to make it comfortable and habitable. This is most critical in homes, where this law will impact our lives the most. And yet while energy conservation, a worthy cause, has strong advocacy in public policy, good lighting has very little.
He hopes for a congressional reversal of the ill-considered prohibition. If that doesn’t work, people do have one more option: stock-piling bulbs for future use. Of course, that probably would lead to the creation of a federal light bulb police, tasked with wiping out the black market in incandescent bulbs. “Use a bulb, go to jail” may become the newest law enforcement slogan!
Filed under: Energy and Environment; Government and Politics; Regulatory Studies
FTC to Protect Us from Multi-Colored Beer Cans
Recently Anheuser-Busch hit upon the marketing idea of selling Bud Light beer in cans decorated with the college-team colors. As the Federal Trade Commission (FTC) doesn’t have much else to do - it’s not like there’s been say fraud going on in the mortgage market – it quickly turned its attention to the issue, expressing “grave concern” that these team-colored cans would encourage underage and binge drinking.
As quoted in the Wall Street Journal, FTC attorney Janet Evans said “this does not appear to be responsible activity.” What’s not responsible is the FTC wasting taxpayer resources wondering what color beer cans we are drinking out of. When I was an underage drinker, the last thing on my mind was the color of the can. The ultimate purpose of the marketing campaign is to shift demand away from boring, non-team color beer cans toward team color cans. If beer drinkers (or can collectors) get some pleasure out of a certain colored can, where’s the fraud or deception in that?
The real purpose of FTC’s interest is revealed in the comments of the Licensing Resource Group, which represents the colleges in protecting their logos. Almost all the colleges that have asked Anheuser-Busch to stop selling the cans have cited trademark concerns. Yet none of the cans have any team logos. While no one would dispute the right of a college to control the use of its team logo, is it really reasonable to conclude that the colleges also own the rights to the use of certain colors?
Virginia Bureaucrats Look to Extort Yoga Instructors
Last month I blogged about attempts by various state governments to regulate yoga instructors by forcing them to obtain a costly government license. Today the Washington Post has a story on Virginia’s efforts to place the government boot on the necks of its yogis:
The State Council of Higher Education for Virginia recently declared that studios offering yoga teacher instruction must be certified. That involves a $2,500 fee, audits, annual charges of at least $500 and a pile of paperwork.
Let’s call this what it is: extortion. And if you still harbor the illusion that bureaucrats don’t sit around thinking up ways to pilfer more money from productive members of society, think again:
In Virginia, yoga teacher training first hit the state’s radar late last year after a state employee conducting school audits happened upon an advertisement, said Linda Woodley, the higher education council’s director of private and out-of-state postsecondary education. Before that, Woodley said, ‘I was not aware they existed, and they were not aware we existed.’
Well congratulations, Ms. Woodley — the yogi community now knows you exist.
Studios can teach lotus poses to as many clients as they like, state officials said. But teacher training programs, which the state views as similar to dog grooming, massage therapy or other classes intended to prepare someone for a job, must be certified under state law. (For instance, Simply Ballroom Dance Teachers Academy, Danny Ward Horseshoeing School and Jiggers Bartending School are certified.)
Virginia citizens should sleep sound at night knowing ballroom dance teachers, horseshoers, and bartenders are government certified.
Woodley said it’s also about ensuring that students who plunk down cash for training programs that can run a few thousand dollars are getting their money’s worth. Plus, she said, being listed on the government registry will give schools a marketing tool, like a Good Housekeeping seal of approval.
Good Housekeeping seal of approval? Ladies and gentleman, this is the mentality of the state bureaucrats that the federal government has tasked with “stimulating” the economy with YOUR money.
Why Future Net Negative Impacts of Global Warming Are Overestimated: Response to Conor Clarke, Part IV
This post responds to the last of Conor Clarke’s comments on my study, “What to Do About Global Warming,” published by Cato. This series started with the imaginatively titled, Response to Conor Clarke Part I, and continued with Cherry Picking Climate Catastrophes and Do Industrialized Countries Have a Responsibility for the Well-Being of Developing Nations?
CONOR said:
I think Goklany is a bit picky and choosey with the evidence. … I also like the Goklany paper a lot. [THANK YOU!! I'll take whatever I get.] But in this case it’s hard to resist. [Emphasis in original.]
To take one example (of several), Goklany’s hunger estimates rely heavily on those published by Global Environmental Change (GEC), which he uses to make the argument that “the world will be better off in 2085 with respect to hunger than it was in 1990 despite any increase in population.” But the GEC produced two estimates of hunger and climate change — one that assumes the benefits of CO2 fertilization and one that does not. Goklany picks the former estimate (I have no idea why), despite the fact the GEC says the effects of climate change “will fall somewhere between” the two. … [I}f you embrace anything other than the most Pollyanish CO2 fertilization estimate -- the one that Goklany uses in his Cato paper -- we will be living in a world in which climate change puts tens of millions of additional people at risk of starvation by 2085.
My RESPONSE:
First, let me elaborate on my selection of the set of studies that I used in my paper. Essentially, the selected set of studies (published in Global Environmental Change) was the only one that had estimated global impacts using detailed process models in conjunction with the IPCC’s latest scenarios, and were peer reviewed. Moreover, they come with a provenance that people who may be unhappy with my results cannot impugn. [This is important only because many people arguing about global warming seem to be more concerned about who did the study and whether the results bolster their predilections, than how the study was done.] Specifically, virtually all the authors were intimately connected with the IPCC. The senior author of the hunger study was also the co-chairman of the IPCC’s Work Group II, which was responsible for compiling the portion of the IPCC’s latest assessment that dealt with impacts, vulnerability and adaptation. The authors of the water resource and coastal flooding studies were the lead authors of corresponding chapters in that IPCC report. An earlier version of the same set of impact studies was the basis for the claim by Sir David King, erstwhile science advisor to Her Majesty’s Government, that global warming was a more serious threat than terrorism (see here). The Stern Review also drew quite heavily from these studies (see below).
American People to Government: Don’t Mess Up the Economy
The American people get it. The government is likely to go too far in “fixing” the economy.
Fifty-four percent (54%) of U.S. voters worry more that the federal government will try to do too much to fix the economy rather than not enough. That’s up three points from a month ago and the highest level of concern found on this question since Barack Obama was elected president.
A new Rasmussen Reports national telephone survey finds that just 37% are more worried that the federal government will not do enough in reacting to the nation’s current economic problems. That’s little changed from last month and down from a high of 44% in January.
Last October, as the meltdown of Wall Street dominated the front pages, 63% worried that the government would do too much. By the first week of November, that number had fallen to 46% and it stayed below the 50% level for several months.
Among the nation’s Political Class, (70%) worry that the government will not do enough. As for those who hold populist or Mainstream views, an identical percentage (70%) fear the government will do too much.
Notable is the contrary thinking of the political class. The vast majority worries that the government won’t do enough. Unfortunately, this group has far more influence over what government is likely to do than does the general public.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Regulatory Studies; Tax and Budget Policy
What Recovery?
Despite the ballyhooed cash-for-clunkers program, retail sales dipped in July. Initial claims for unemployment also rose. Housing continues to be plagued by foreclosures. And many banks are still operating under the burden of toxic assets, which inhibits their ability to provide credit. These are not the recipe for an economic recovery. Yet the Federal Reserve is signalling it thinks a recovery is on the way. And President Obama is making happy talk on the economy.
A recovery may very well technically begin in the 3rd quarter of 2009, as signalled by rising GDP. But it is shaping up to be a jobless and joyless recovery. Firms are finding ever new ways of producing and earning some profits without hiring workers. The prospect of higher taxes for health care and to fund all the bailouts understandably makes businessmen cautious about taking on the liability of new workers.
The administration’s economic policy has been behind the curve. The idea of initiating new federal mandates, like health care and cap-and-trade with the attendant higher taxes, is a sure way to derail an economic recovery. What is needed is less spending and broad-based tax cuts. The administration’s economic policy is the real clunker and it is time to trade it in.
Filed under: Finance, Banking & Monetary Policy; General; Regulatory Studies; Tax and Budget Policy
Time for a Change in Sugar Policy
Washington’s dysfunctional agricultural policy is costing consumers again. Limits on sugar imports, designed to protect a few large sugar producers, are driving up prices in a tight market. Reports the Wall Street Journal:
Some of America’s biggest food companies say the U.S. could ‘virtually run out of sugar’ if the Obama administration doesn’t ease import restrictions amid soaring prices for the key commodity.
In a letter to Agriculture Secretary Thomas Vilsack, the big brands — including Kraft Foods Inc., General Mills Inc., Hershey Co. and Mars Inc. — bluntly raised the prospect of a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products.
The companies threatened to jack up consumer prices and lay off workers if the Agriculture Department doesn’t allow them to import more tariff-free sugar. Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil.
While agricultural economists scoff at the notion of an America bereft of sugar, the food companies warn in their letter to Mr. Vilsack that, without freer access to cheaper imported sugar, ‘consumers will pay higher prices, food manufacturing jobs will be at risk and trading patterns will be distorted.’
Officials of many food companies — several of which are enjoying rising profits this year despite the recession — declined to comment on how much they might raise prices if they don’t get their way in Washington.
The letter is the latest salvo fired in a long-simmering dispute between U.S. food companies and the sugar industry over federal policy that artificially inflates the domestic price of U.S.-produced sugar in order to support the incomes of politically savvy sugar-beet farmers on the Northern Plains and cane-sugar farmers in the South. Most years, the price food companies pay for U.S. sugar is twice the world level.
President Barack Obama ran on the platform of change. How about changing agricultural policies which enrich the farm lobby at consumer and taxpayer expense?
Filed under: Government and Politics; Regulatory Studies; Tax and Budget Policy; Trade and Immigration
Barney Frank Endorses Regulatory Protectionism
When a government increases the burden of taxes, spending, and/or regulation, this makes it more likely that productive resources – on the margin – will gravitate to jurisdictions with better economic policy. Crafty politicians understand that the freedom to cross borders is a threat to statist policies, which is why international bureaucracies dominated by high-tax nations, such as the Organization for Economic Cooperation and Development, are trying to undermine tax competition between nations by imposing fiscal protectionism. The same is true for regulation. The Chairman of a key House committee wants to impose regulatory protectionism to restrict the ability of Americans to patronize banks and other financial services companies based in jurisdictions with more laissez-faire policies. The Financial Times has the unsavory details:
Barney Frank, chairman of the House financial services committee, said he was concerned the new U.S. push to regulate banks and brokers more rigorously could put it at a competitive disadvantage if other countries did not follow suit. As a result, he would like to ban U.S. banks from doing business with countries not subject to similarly tough standards on everything from leverage limits and capital requirements to rules on transparency and clearing of derivatives. “Once we have rules . . . we will say to anybody who wants to be an outlier, ‘you forfeit your right to participate in the American system’,” Mr Frank told the Financial Times. “We will instruct the [Securities and Exchange Commission] and Treasury and the Fed to deny access to the American financial system to any country that holds itself out as a haven to escape our financial regulation.” …“It is absolutely the wrong approach,” said a top industry lawyer, who did not want to be identified criticising Mr Frank. “The assumption is that everybody has to do business in the U.S. and we can set global standards. That is absolute nonsense. There are alternatives, including Hong Kong,” the lawyer added. …Tim Ryan, president of the Securities Industry and Financial Markets Association, said that U.S. regulations should not be imposed on other countries. …Mr Frank’s interest in banning groups from non-co-operating countries stems in part from the U.S. experience after it adopted the Sarbanes-Oxley corporate accountability law. Many overseas companies opted to list outside the U.S. rather than comply with Sarbox requirements.
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