Finding Friends at the Orphanage

We have been feeling left out.  As Josh Hawley and Marco Rubio have been making headlines about creating a more intrusive and authoritarian right in order to match up with the left, us market oriented folks that feel a kinship with the growth fairy have felt left out.  Matthew’s and David’s critiques of Marco are reasonable but neither made us felt like we had much overlap in our Venn diagrams.

Kevin D. Williamson (all of these are at NRO) has helped us feel like less of an orphan with Marco Rubio’s Half-Baked Political Philosophy.  You should read all the links to see what is going on but do make sure to read Kevin.  Here is a  great paragraph that explains why Marco is on the wrong path:

Men such as Senator Rubio desire for themselves the power to overrule markets — to limit trade and property rights, enterprise and exchange — in the service of what Senator Rubio describes as the “common good.” The problems with that are several. For one thing, Senator Rubio does not know what the common good is and has no way of knowing. For another thing, we know quite well, from long experience, how such vague and plastic notions of the “common good” interact with the discrete good. [Emphasis added]

We agree with Kevin why it is a problem.  As Kevin kindly puts it, there are at least several reasons why any modifier to capitalism really become crony as in crony capitalism.  We also agree on the solution:

Capitalism is what happens when government respects property rights, which include the rights to trade and to work. What we need from men in government is not the quasi-metaphysical project of reinventing capitalism in the name of the “common good.” What we need from government is — government.

It is nice to be in the orphanage with Kevin.  We could be a category like Capitalistic Orphans.  We wonder if Dave Barry would like that as a band name?  The problem is that voters (or at the very least political advisors) seem to like quasi-metaphysical projects for the economy and society, e.g., MAGA.  Thus, for Capitalistic Orphans is option is not finding a majority but finding enough support to become a faction on the right.  We hope you will join us.

How Matters

Jon Pavolvitz is getting likes on Facebook for his post I’m Not On The Radical Left, I’m In The Humane Middle.  It has a picture of a winsome lass sitting on the double yellow line of a highway.  Jon says he supports the Declaration of Independence and The Golden Rule so he doesn’t understand why folks call him part of the radical left.  He then goes on to list his beliefs which we reproduce below in bold with our comments.  Other than the first one they are pretty inexplicit.  How you would accomplish these goals matter and determine where you stand.












We suspect that Jon, like many people, doesn’t think much about the other side.  Perhaps he thinks of The Donald as right wing.  We don’t.  There are some nasty folks on both sides of the political divide but, by and large, most of them are trying to solve problems.  Largely, the disputes are about priorities and methods.  For example, it is generally true that people on the left want to raise the minimum wage and people on the right don’t.  There are people on the left that want to raise the minimum wage for nefarious reasons but most of them really think it will help poor people.  Most of the people on the right think it will harm the poor.  Such a difference of opinion doesn’t make either side evil.  We think that folks have often failed in their responsibility to investigate alternative thinking.

 

In Defense Of Saab

We took great umbrage at the beginning of Kevin D. Williamson’s new NRODT article, Elizabeth Warren Is Wrong About Pay Day Lenders, (we are bit sure about the paywall) that comes out early on NRO.  Of course, any article that starts with “Elizabeth Warren Is Wrong” is likely to be good and the article is terrific and you should read it all.  You should subscribe if you haven’t.  The problem is the beginning.  Kevin says:

Do you know who the car-finance guys really miss? “Saab,” he said. “The Saab customer was the best.” The people who bought Saabs turned out to be as sensible and practical as the people who designed them — good credit, appropriate incomes, sensible down payments. “It wasn’t like Porsche or Land Rover,” he said. “Nobody bought a Saab because it fulfilled some fantasy.”

We loved our Saab.  Now our love might have been augmented by the fact that it replaced the Toyota with over 400,000 miles that would only start if you put a coat hanger in the carburetor just before you cranked the key and then removed immediately after the vehicle started.

Sidebar: Here is a cite for those of you that don’t know what a carburetor is.  We are pretty sure that the Saab was our first fuel injected vehicle.  End Sidebar

It was fortunate that the Toyota hood (like the Saab) was hinged at the front so starting it only required a mild bit of contortion.  The Saab not only started all by itself but it was responsive, was a joy to drive, and had a heated seat, another thing that has become standard but wasn’t several decades ago.  It also had its practical side with front wheel drive (another innovation) and big tires that took the worry out of Wisconsin winters.

Why is Kevin’s article great?  First he makes this point:

Being poor sucks, and no regulation is going to change that.

Later he expands on exactly why:

Of course, there are a lot of broke-ass suburbanites driving around in Land Rovers they cannot really afford. It is not only the poor who make bad financial decisions. (I could produce a conspectus [your word of the day] of my own.) But the poor always have less room for error, and for their errors, as for most things, they pay a proportionally higher price.  [Emphasis added]

The play Fences has some great examples of the poor making good and bad decisions.  The dad, Troy, discusses with one of his sons if they should fix the roof or get a TV.  Troy isn’t as poor as some but he he trying to show his son exactly the problem Kevin describes.  They can only do one or the other.  Troy is working poor but his good financial sense allows him to help out others at the cost of some advice.

Kevin would like the Fences model but recognizes, unlike Elizabeth, that pay day lenders might be the best option for many folks.  Too bad he never yearned to have a Saab of his very own.

Good Ideas, Bad Ideas, And Bad Claims

The left cannot claim to have all the bad economic ideas.  They have the worst as we see in Venezuela but they do not have exclusive rights to such ideas.  There are lots of ideas out there and some of them are good but to get them noticed folks often make extreme claims.  Thus, good ideas get dismissed because they are not quite as good as the claims suggest.

Our example of a bad idea comes from Cesar Conda at NRO.  He says:

President Trump should propose exactly what President Barack Obama did in 2011: a temporary reduction in the Social Security portion of the payroll tax from 6.2 percent to 4.2 percent.

Cesar Conda is:

a former Bush-Cheney White House domestic-policy adviser and senior aide to three Republican U.S. senators, is founding principal of Navigators Global.

He is writing at NRO.  It is not unreasonable to take him seriously.  We shouldn’t.  Part of his argument is economic growth and we are fans of the growth fairy.  Economic growth is critically important and we believe that governments can influence the growth fairy.  But the way to get the growth fairy on your side is through long-term policies.  Countries with policies that support economic freedom like enforcing the rule of law, having low corruption, low regulation, low taxes, and free trade are highly likely to be visited by the growth fairy.  Going in the opposite direction then the more likely the growth fairy won’t visit.

The best you can hope for with Cesar’s idea is to move growth around.  It was one of many bad ideas from the 44th president.  It is worse now given the deficit and the near insolvency of Social Security.

Sean Maskai Flynn at Market Watch has two really good ideas for improving health care and reducing or limiting the costs.  They are good ideas because they are long-term and make healthcare more of a marketplace than it currently is.  First, we need transparent health care prices:

The first policy—price tags—is a necessary prerequisite for competition and efficiency. Under our current system, it’s nearly impossible for people with health insurance to find out in advance what anything covered by their insurance will end up costing. Patients have no way to comparison shop for procedures covered by insurance, and providers are under little pressure to lower costs.

Absolutely.  And second we need health savings accounts (HSA) that revert to the owner or can be extended into future years.  We don’t agree with Sean that the employer needs to “gift” them and he is surely wrong that it is a gift.   Any such payment is surely part of compensation rather than a gift.  We are not sure of how such a payment would be treated by the IRS.  The tax treatment of HSA need to be part of the solution.  We think the important points are high HSA limits and the opportunity to move amounts among years.

The second policy—deductible security—pairs an insurance policy that has an annual deductible with a health savings account (HSA) that the policy’s sponsor funds each year with an amount equal to the annual deductible.

The details are important but the problem is that the headline says these two changes would reduce health care costs by 75 percent.  Nope.  The text says they will provide $2.4 trillion [yup, trillion] per year in savings.  Since health care spending in 2017 was $3.5 trillion this gets another Nope.  Still, transparent prices and HSA with high limits and methods to move amount into other years or revert to the owners are great ideas.  Temporary tax changes are not.  Realistic claims are another good idea.

 

Expected Good News

One of the many great things about markets is that they encourage learning.  Isaac Orr at The Center of the American Experiment has an excellent article with a great title:

Capitalism is Saving the Planet Part Six: Minnesota Forests Are Flourishing

It is expected good news because capitalism and markets learns what generates profits and what the consumer wants.  You should, of course, read it all to get the details.  And you can savor the title again.  We will give you Isaac’s conclusion:

Using these technologies [see here] is not only good for the timber industry’s bottom line, they are good for the forests themselves. Rather than being an opponent of healthy forests, the capitalist timber industry is more invested in forest health than any other stakeholder, and therefore they have the most incentive to ensure Minnesota forests are healthy and vibrant.

Although Isaac uses environment as a category he doesn’t remind us that trees are natural carbon eaters.  The link tells us:

As a tree matures, it can consume 48 pounds of carbon dioxide per year (among other greenhouse gases like ozone), and releases enough oxygen for you to breathe for two years!

So the one billion additional trees in Minnesota will be eating 48 billion pounds of CO2 per year.  According to Wikipedia, Minnesota produces just under 90 million metric tons of CO2.  A metric ton is 2205 pounds so this is a big deal in term of arresting CO2 growth even if we are not entirely convinced of all the numbers.  We are working to find Isaac’s other five parts.

Venezuela Reminder

There is a strange presentation to a column in the WSJ.  The column title is The Americas which is written by of one of our favorite columnists, Mary Anastasia O’Grady, it has her picture on the link, and at the end of the column it has her email address but her name is not displayed.  Perhaps it is caused by something in our technology.  The column is Mary Anastasia at her best.  You should, as is often said, read it all.  She weaves together the religious and political traditions of Venezuela that have led us to the current sorry state of affairs.  Mary Anastasia tells us:

Climbing out of this hole will take more than removing dictator Nicolás Maduro. The country is devastated, but Venezuelans haven’t abandoned the collectivist cause. Many popular opposition politicians still call themselves socialists, unwilling to defend the creative class and its members’ right to the fruits of their labor.  [Emphasis added]

It is an amazing deep hole that Venezuela finds itself in.  Devastation, if anything, is not a strong enough word for what has happened to Venezuela.  Here is an estimate that inflation will be eight million percent in 2019.  Of course, many transactions are barter now that the currency is virtually worthless. Mary Anastasia is exactly right.  Venezuela elected Hugo (Obama’s mi amigo) and then Nicolas.  Not all of the elections were fair but those two had substantial support in Venezuela.  External actors like The Donald might be able to help a little but it is up to the locals to fix this.  Mary Anastasia hopes that the Catholic Church can help.  We hope so too.

Fighting Socialism, Part Two

In Part One we were supportive of Catherine Rampell’s thesis that using socialism as a scare word is lazy.  We need to fight socialism but we need to do it better.  Catherine gives us two reasons that we need to do a better job a fighting socialism.  First, folks don’t understand it:

The most common answer, volunteered by about a quarter of respondents, was that it had something to do with “equality” — “equal standing for everybody, all equal in rights, equal in distribution,” something to that effect. Smaller percentages mentioned communism, government control of utilities or even “talking to people, being social, social media, getting along with people.”

That quote is about as scary as information gets.  The related second reason, is because they don’t understand it they (and especially young people) think it is OK or even a good idea:

A majority of adults under age 30 already view the term “socialism” positively; about 40 percent of those ages 30 to 49 say the same.

By now you should be really worried.  We think that two of Catherine’s examples point that out.  One relates to Ronald Reagan and Medicare.  It ties nicely into how we work so hard at ignoring the entitlement and debt problem in the US:

Over the past 60 years — since Ronald Reagan warned that Medicare would doom the country to the s-word — the GOP has turned into the boy who cried socialism.

Socialism, as Catherine says, is about controlling the means of production.  We are not sure that reasonable people can disagree that Medicare has led to government control over the means of medical production.  In accounting we worry about control because we need to decide what companies should be consolidated as one unit for financial reporting purposes.  The old rule for consolidation were simple so we are going to stick with them: over 50 percent must consolidate, 20 to 50 percent it depends, and under 20 percent it is unlikely.  What it depends on for 20 to 50 percent is things like the next biggest stockholder.  If MWG owns 49 percent and the next biggest shareholder is 1 percent then it is likely that MWG controls that entity.

Here (there is other stuff too so read on) is a discussion of how much of the national health expenditure comes from the government.  Our point is that the government is such a large percentage compared to anyone and everyone else that they control medical delivery.  A small example of this is that MWG has to answer the Medicare questions on every visit to the clinic.

Ronald was right.  Medicare socialized medicine and now paying for Medicare is the biggest problem our republic faces. And Ronald gets part of the blame because in his remarkable presidency did many things including helping to reform Social Security (it still needs more reform but without it we would have even bigger problems) but did not reform Medicare when he clearly understood the problem.

The other problem is when Catherine says this:

The real debate Americans are having — including those on the far left trying to gain greater control of the Democratic Party — is about how regulated markets should be and how to make the rules fairer. No one in the 2020 race, not even relative outlier and self-proclaimed democratic socialist Sen. Bernie Sanders, I-Vt. [Act Naturally], is proposing that we recreate the Great Leap Forward.

We don’t know if Act Naturally is an outlier.  We know that he is one of the many candidates for the Democrat nomination for president that supports the Green New Deal (GND) although most support it by voting present.  We think know she knows about the NGD because she has written about it:

The resolution calls for net-zero carbon emissions by 2030 — though the International Panel on Climate Change proposes getting there by 2050, itself a herculean task. The resolution offers little guidance about how to achieve this — carbon tax? cap and trade? what of nuclear energy? — perhaps because the authors knew such choices would divide progressive constituencies.

The documents beyond the resolution answer most of her questions.  Here is part of the answer:

End destructive energy extraction and associated infrastructure: fracking, tar sands, offshore drilling, oil trains, mountaintop removal, natural gas pipelines, and uranium mines. Halt any investment in fossil fuel infrastructure, including natural gas, and phase out all fossil fuel power plants. Phase out nuclear power and end nuclear subsidies. End all subsidies for fossil fuels and impose a greenhouse gas fee/tax to charge polluters for the damage they have created.” [Emphasis added]

The answer to Catherine’s query on nuclear energy seems especially clear.  Let’s compare it to the Great Leap Forward:

The Great Leap Forward (Chinese大跃进pinyinDà Yuèjìn) of the People’s Republic of China (PRC) was an economic and social campaign by the Communist Party of China (CPC) from 1958 to 1962. The campaign was led by Chairman Mao Zedong and aimed to rapidly transform the country from an agrarian economy into a socialist society through rapid industrialization and collectivization. These policies proved to lead to an exponential social and economic disaster, but these failures were hidden by widespread exaggeration and deceitful reports.

Neither idea seems like a good one but we are hard pressed to say that the Great Leap Forward is a worse idea that GND.  In fact, they both look to transform an economy in a very short period of time.  One required coercion.  The other will require even more coercion if it comes to be.  It will be interesting when the government comes to confiscate cars, trucks, power boats, power mowers, ATVs, and so on.  The folks that own them also tend to own guns.

Sidebar: We brought up eminent domain in part one.  We do not have the legal expertise to have much of an opinion but we wonder if the government will have to pay for all of the stuff they propose taking.  We put this in a sidebar because neither outcome makes GND a good idea.  It is, as they say when belittling our profession, academic.  End Sidebar.

We agree with Catherine on the need to be more specific in combating socialism.  We seem to disagree on need to combat it.  We think we need to address the overall problems and the problems of specific proposals.  It is important to label the former as socialism but not the latter.