Jun
29
“Cash for Clunkers”
By RW. Filed Under Commentary | Leave a Comment
The US government is now offering to give anyone wanting to trade in a car of sub par fuel economy a subsidy for the purchase of a new car. The alleged purpose of this is three fold: 1) getting rid of all the cars with poor fuel economy for the sake of benefiting the environment, 2) reducing dependence on oil for geopolitical and cost reasons, and 3) (likely the main reason) assisting the failing American car industry. The plan is to crush the old cars and give people as much as $4,500 towards the purchase of a new car.
As serving the purpose of reducing the consumption of fuel, this may or may not be a good idea. This is all dependant on a complex cost-benefit analysis that is beyond the scope of my research abilities. As for providing economic stimulus benefits (target towards benefiting the auto industry), this is generally likely a bad idea. First, this seems to be an instance of what’s called the “broken window fallacy“. The idea behind the broken window fallacy is that you can help the economy by destroying existing supply to stimulate the creation of jobs created to rebuild the supply. Breaking all of a city’s windows will most certainly create work for the window industry, but it will cost the overall economy wealth. The reason: a free(er) market economy allocates resources in a highly efficient way. When money is artificially diverted it is almost always the case that the person or agency doing the diverting does not have the level of information and sophistication that the market does. Accordingly, scarce resources are wasted and dollars that would’ve gone to their productive use (other businesses in the economy) are “misspent”.
To make it worse, there is definitely something wrong about spurring demand for products that would fail without government subsidy. The break up of the big three is should likely be considered a success of the market system by purging our economy of a highly inefficient, failing business. One last distortion is the change caused in the spending behavior of consumers. At this point, while I agree that to get this economy working again we need to get consumer spending up, the way to do it is not to convince them to go out and get into more debt for things they don’t really need. As I said earlier, the energy and environmental value of this policy is a complex issue and may be perfectly legit, but as an effort to help the economy it seems to be a blatant sin against sound economics.
![[Post to Twitter]](http://omgbees.com/wp-content/plugins/tweet-this/icons/tt-twitter3.png){kind=icon}
Jun
28
Supply Side Economics in Maine?
By JZ. Filed Under News | Leave a Comment
The Wall Street Journal recently reported on the economic legislation passed in Maine. Maine is probably not the first place one would associate with tax cuts and spending reductions, but that is no longer the case. The state government, dominated by Democrats, recently promoted a radical reversal of course on fiscal policy:
This month the Democratic legislature and Governor John Baldacci broke with Obamanomics and enacted a sweeping tax reform that is almost, but not quite, a flat tax. The new law junks the state’s graduated income tax structure with a top rate of 8.5% and replaces it with a simple 6.5% flat rate tax on almost everyone. Those with earnings above $250,000 will pay a surtax rate of 0.35%, for a 6.85% rate. Maine’s tax rate will fall to 20th from seventh highest among the states. To offset the lower rates and a larger family deduction, the plan cuts the state budget by some $300 million to $5.8 billion, closes tax loopholes and expands the 5% state sales tax to services that have been exempt, such as ski lift tickets.
Maine is no stronglhold for conservatism, but the state’s leadership realizes the evident successes of tax reductions and private sector incentives. Governnor Baldacci, a Democrat, sounded like more of a conservative than most Republicans when promoting his plan: “We hope these lower tax rates will encourage and reward work, and that the lower capital gains tax [of 6.85%] brings more investment into the state.”
The Wall Street Journal article astutely recognized the paradox of Democrats essentailly rebuking the standard liberal economic approach:
One question is how Democrats in Augusta were able to withstand the cries by interest groups of “tax cuts for the rich?” Mr. Baldacci’s snappy reply: “Without employers, you don’t have employees.” He adds: “The best social services program is a job.” Wise and timely advice for both Democrats and Republicans as the recession rolls on and budgets get squeezed.
As the liberals in Maine embrace Ronald Reagan, will other states seeking economic growth soon follow? As common sense fiscal sanity prevails in Maine, maybe Washington can take a cue.
Jun
28
Public Option: the Gateway to a Single Payer System
By JZ. Filed Under Commentary | Leave a Comment
As the health care debate rolls on, it appears that the major point of friction is the public healthcare option. The President claims that a public insurance provider will compete with private insurance; it will keep them “honest.” Citizens will be able to consider the government plan against the private options and then choose which ever is best. This sounds good in theory, but is this realistic?
The public option will have several unfair advantages over private insurance. The government can set reimbursement rates. The government will make the rules, and then participate in the competition. Essentially it will be an umpire and a referee simultaneously. Will it reimburse the government option first, and then private insurers secondarily? Will it set artificially low rates, which the private sector cannot match? Unlike an insurer, the public option will not be required to make a profit.
The government has other unique powers not granted to business. The government has unlimited financing, it can either print money or tax. It can issue licenses, regulate the industry, or grant patents. Washington will be regulating an industry and concurrently competing. The government will also not be required to make the investments which occur in the private sector. Where will the government get the medication it provides? What about the new treatments that are developed? It will borrow them from the for-profit American healthcare system, which is responsible for 90 percent of the world’s new medical technologies.
With fewer individuals to insure in the private sector, insurance companies will find it unprofitable to do business. Millions of Americans will be forced onto the government option. President Obama even admits that many companies could chose to simply stop offering private insurance. The employees would then be transferred to the public option. This is the main fear of some opponents, who ultimately claim that any public option will become nationalized health care.
Jun
27
EPA Suppresses Report Questioning Global Warming
By JZ. Filed Under News | Leave a Comment
CBS news is reporting that the EPA stifled a report skeptical of climate change. Shortly after the report was silenced, the agency submitted pro-regulation recommendations to the Obama administration. The author of the research, an EPA employee, reached a different conclusion than the agency consensus. In an email to the employee, a supervisor requested silence on the issue:
“The administrator and the administration has decided to move forward… and your comments do not help the legal or policy case for this decision.”
The report, written by Alan Carlin, questions the EPA’s suggestions to the White House. Carlin suggested alternative solutions other than heavy regulation of carbon dioxide:
After reviewing the scientific literature that the EPA is relying on, Carlin said, he concluded that it was at least three years out of date and did not reflect the latest research. “My personal view is that there is not currently any reason to regulate (carbon dioxide),” he said. “There may be in the future. But global temperatures are roughly where they were in the mid-20th century. They’re not going up, and if anything they’re going down.”
This allegation ironically appears similar to complaints made against the Bush administration for politicizing pro-climate change research.
Jun
25
Obama ABC Special Finishes in Last Place
By JZ. Filed Under News | Leave a Comment
President Obama’s ABC health care special failed to draw large amounts of viewers Wednesday night. The program finished behind NBC and CBS in ratings. Filmed at the White House, the special featured Obama answering questions from Americans regarding his proposed changes to the healthcare system.
The one-hour ABC News special “Primetime: Questions for the President: Prescription for America” (4.7 million viewers, 1.1 preliminary adults 18-49 rating) had the fewest viewers in the 10 p.m. hour (against NBC’s “The Philanthropist” debut and a repeat of “CSI: NY” on CBS). The special tied some 8 p.m. comedy repeats as the lowest-rated program on a major broadcast network.