House and Senate negotiators are working out details of a big farm bill that may pass this year. No industry in America is as coddled as farming, and no industry is as centrally planned from Washington. The federal sugar program is perhaps the most Soviet of all. Here’s a sketch of the sugar program, which the supposedly conservative, tea party-dominated lower chamber may soon ratify:
- Purpose. The federal sugar program is designed to enrich sugar producers, such as the wealthy Fanjuls, and rip off sugar consumers by keeping domestic prices artificially high. In recent decades, U.S. sugar prices have often been two or more times world prices. The federal government achieves that result by price guarantees, trade restrictions, production quotas, and ethanol giveaways.
- Guaranteed Prices. The Department of Agriculture runs a complex loan program to support sugar prices. Essentially, the government promises to buy sugar from processors at a set price per pound. Processors can sell to the government, or they can sell in the marketplace if the (manipulated) market price is higher.
- Trade Restrictions. Complex import barriers called “tariff rate quotas” help to maintain high domestic sugar prices. Imports are restricted to about one quarter of the U.S. market, and each foreign country (except Mexico) is allocated a particular share of imports.
- Production Quotas. The government imposes quotas, or “marketing allotments,” on U.S. producers. The United States Department of Agriculture decides what total U.S. sugar production ought to be and then allots quotas to beet and cane sugar producers. Most sugar beet production is in Minnesota, Idaho, North Dakota, Michigan, and California. Most sugar cane production is in Florida and Louisiana.
- Ethanol Giveaway. If prices fall below certain levels, the USDA is required to fire up a sugar-for-ethanol program to channel sugar away from the food industry.
The USDA is supposed to run the sugar program at no taxpayer cost, which makes the central planning even trickier. The agency must fiddle to adjust imports, quotas, and the ethanol giveaway to optimally fatten the wallets of sugar producers, while not allowing the domestic (manipulated) market price to fall so low as to impose taxpayer costs.
A possible wrench in the works of the current farm bill is that the sugar program is on track to cost taxpayers perhaps hundreds of millions of dollars this year (see here and here). So if conservatives in Congress vote for an unreformed sugar program this year, they would be not only voting for central planning, corporate welfare, higher consumer prices, harm to U.S. food manufacturers, and environmental damage, they would be voting for higher taxes as well.
[Air bags] were first put on the market – in the early-mid 1970s by both GM and Chrysler – as optional equipment that people could buy. Or not.
Most people chose not to buy.
Not because they were cavalier risk junkies … But simply because the cost of the air bags was prohibitive. They added as much to the bottom line price of a car (this is back in the ’70s) as air conditioning did – and AC was just about the most expensive option you could buy in those days.
So, they failed in the marketplace. Which is why the car companies worked with the government to see them made mandatory. Now you cannot say no to air bags. And to many other “features” you may not want in a car. These features are not necessarily bad. The question is – or ought to be: Can you afford them? Many people cannot. Hence the now-common six-year payment plan. Soon – count on it – to be expanded to seven years.
Government – the people who run it – have this blind spot about economics. Because for them, economic laws don’t apply. Cost-benefit considerations that normal people must entertain are, at most, abstractions for those who wield political power. That is, people who wield organized violence.
Thus, Obama (or whomever; the particular personage of the Dear Leader at any given moment is incidental) can simply decree that – for example – all new cars will be able to withstand a rear-impact by a car traveling 40 MPH or be able to barrel roll a dozen times and not have the roof crush, or average 35.5 MPG. Let the engineers figure it out.
And let you and me pay for it.
The giant cartels that produce cars are just as bad. They want money as much as the government wants power. Which is why they now anticipate the next new government mandate – or even trot out “new ideas” (examples include Volvo and its hood air bags – ostensibly to “keep pedestrians safe” – and the current trend, cars that stop themselves automatically) and practically beg the government to make them mandatory.
This serves two purposes. It makes them money – and it makes it more and more expensive and thus harder and harder for anyone else to break into the car business. This curtails competition – and encourages consolidation, which leads to even greater degrees of cartelization. This trend – the disappearance of smaller brands or their absorption by the handful of big Kahunas… the ever-greater degree of homogeneity . . is obvious to even casual observers. Cost goes up – and choice (real choice, as in something actually different in a meaningful, functional way) diminishes.
But, by what right do they burden us with these costs – or limit our choices? Why should allegedly “free” people not be free both to choose whatever type of car meets their needs – and budget?
It is an outrage that we’re not “allowed” to choose. That we do not have the option to buy a $3,000 Tata that might be just the ticket for in-city A to B driving. Or a Mahindra compact diesel truck. Or a Land Rover Defender 4×4 without air bags or much in the way of power anything.
The problem is most people are not outraged about this. They don’t seem to mind being told what they’ll buy – nor how much they’ll pay for it. They’d probably be annoyed if their next door neighbor marched over one day and told them they had to drive this type of car – and weren’t going to be allowed to drive that type of car. Their first reaction would be open-mouthed bewilderment. Their second reaction would be: Who the hell do you think you are? And then: Get the hell off my property – and mind your own business.
And yet, most people will accept the same damn thing when it’s done at once or twice remove, by “regulation” and in a city, far, far away.
It’s bizarre, when you think about.
An example of cognitive dissonance – and what we Libertarians call (among ourselves) the myth of authority. It is the idea that it’s ok for some people (or some groups of people) to dictate to other people (and groups of people) what they can and cannot do.
Now, to be clear, we’re not saying people ought to be able to do anything they want to. The line in the sand is “so long as you don’t cause harm.” Otherwise, yes, each of us has an absolute right to do exactly as we please – without someone else telling us (and threatening us) that we cannot do it.
That includes buying whatever car we’d like to buy – equipped as we’d like it to be equipped. The idea that some other person – whether individually or claiming to represent the Great Collective – has the right to interpose, to dictate to us what we’ll buy and how much we’ll pay is something earlier generations would never have taken lying down.
I see no reason why we ought to take it, either.
“Look at the difference: In 1977 I bought a small house in Portland Oregon for $24,000. At the time I was earning $5 per hour working at a large auto parts store. I owned a 4 year old Chevy Nova that cost $1,500. Now, 36 years later that same job pays $8 an hour, that same house costs $185,000 and a 4 year old Chevy costs $10,000. Wages haven’t kept up with expenses at all. And, I should point out that that $5 an hour job in 1977 was union and included heath benefits.”
an anonymous online commenter on the current economy. (via alchemy)
LTMC: When I was working at a gas station, I had an old-timer come in and tell that he used to make $2/hour at a factory job when he was in his late 20’s. He said he could feed his whole family for the night by buying a 24-cut pizza for $2. Fast forward to my gas station job, where I was making $8/hour, but a 24-cut pizza in my town costs closer to $20—2.5 times more on a dollar-for-dollar basis. He said he had no idea how I even survived on what I was making (I was insured through college at the time, but had no savings, and relied on family for large expenses).
This is what people mean when they talk about income inequality. The reason wages have not kept pace with expenses is because the nation’s previous method of wage redistribution—union representation—has declined substantially. Wage increases have subsequently been absorbed on an increasingly larger basis by corporate entities and the top 1% of earners. Strong unions used to serve as a soft redistribution mechanism to help ensure that increases in prosperity were shared equally. A critical mass of union representation in the labor force has always had derivative wage benefits in the non-union labor market. That critical mass no longer exists, however. Consequently, the decline of union labor has led to a concurrent decline in wages relative to expenses, because there’s no longer an institutional mechanism for redistribution of earnings increases in the economy. The critical mass of union representation is gone, and nothing has taken its place.
First, income inequality has nothing to do with poverty or well-being. People in, say, Beverly Hills may have large discrepancies (“inequalities”) in income but they are all fairly wealthy. And people in, say, some slum in Bolivia may have no income inequality but they are all equally poor. Indeed, the poor in the United States are wealthy compared to the poor in Africa. Relative wealth is absolutely meaningless. It falsely presumes that wealth cannot be created and that trade is zero sum. How wealthy my neighbor may be does not necessarily affect me unless I, frankly, allow envy to interfere with my happiness.
Second, the most relevant manner in which union representation has anything to do with “income inequality” is insofar as unions price out marginal workers from jobs through their government protections against “scabs” and their support for minimum wages. Unions have not been the great protector of the worker that the left makes them out to be.
There are many reasons why someone might conclude that most were better off in 1977 than today.
Regulations - ostensibly required for matters of safety and protecting the environment - have increased the costs of automobiles dramatically. Cars cannot simply be made as cheaply as they once were, and those that might be more affordable elsewhere are made more expensive due to protectionist import tariffs or outright bans. Furthermore, advances in technology have equipped cars in ways unthinkable years ago. That used mid-70’s Chevy Nova had none of the safety and luxury and comfort features standard in cars today. Those airbags, radios, and power windows aren’t free to produce, after all. Ergo, comparing the price of a cheap car in 1977 and a cheap car in 2013 is not comparing like goods. Instead, the 1977 Nova may have more in common with a brand new, barebones Tata from India which, if not for government/EPA interference prohibiting its import into the United States, would cost the American consumer about $3,000. And, adjusted for inflation, that $3000 today is much less than than the $1500 spent on the used Nova in 1977.
Housing is made more expensive mostly because of goosed demand facilitated by easy credit from government agencies and lowered lending standards facilitated by government decree. The housing bubble is decades in the making (though it really began its meteoric climb in the 1990s), and the recent correction didn’t come anywhere near correcting since the same activities that led to the bubble are mostly still in effect. A dramatic decrease in lending standards put people into homes that they could not afford, creating an increase in demand that drove the costs of owning a home upward.
Russ Roberts, in his paper “Gambling with Other People’s Money,” details the entire process of perverted incentives in the housing market that incentivized buyers to purchase more and bigger homes while protecting investors from the risks of making such loans - all which led to dramatic increases in housing prices, most of which are still artificially overvalued today. (Also relevant are Woods’ Meltdown, Sowell’s Housing Boom and Bust, and Norberg’s Financial Fiasco)
Furthermore, government involvement in education has steadily pushed prices of education upward while simultaneously devaluing the marketability of said education. Graduates, thus, begin their careers with a large amount of debt which affects their ability to save. The attempts to make education as market agnostic as possible has also led people into majors with little practical utility (while diminishing the prevalence of trade schools), further harming their employability in the marketplace.
And with minimum wages pushing individuals to enter the workforce much later than they once did, said individuals are thus that much behind in their ability to advance in their careers and move past the point in which a minimum wage would be relevant to them. (See here, here, here, here, and here for more on why the minimum wage is terrible for the economy in general, and marginal workers specifically.)
But the true culprit in devaluing the purchasing power of the dollar is the Federal Reserve.
This is why comparisons of prices and wages must always be “inflation-adjusted.” The minimum wage today ($7.25) is over three times what it was in 1977 ($2.30). Adjusted for inflation, however, it is actually 18% less. In other words, it is inflation that makes the income less valuable. But most people don’t understand what inflation is, and they just take it as a given.
On the contrary, economy-wide price inflation is a product of monetary inflation - that is, an expansion of the money supply.
At the start of 1977, M1 (total stock of monetary assets in the economy) was $306.9 billion. Today, M1 is $2.6 trillion. That’s an increase of 847%. Every dollar added, thus, makes every dollar in existence that much less valuable.
Strictly speaking, inflation is what happens when a government central bank — in our case the Fed — increases the supply of money and credit out of thin air. When these increase and the supply of goods does not, prices will generally rise — that is, the value of the dollar will fall — and it will take more money to buy things than previously. That’s common sense. If people have more money to spend, not because they produced and sold more goods, but only because the central bank printed it, prices will rise with the rising demand. Generally, a rise in prices is called (price) inflation, but it’s actually just the consequence of (monetary) inflation.
When the value of the dollar falls, our incomes fall, even if wages are nominally unchanged. With price inflation, one hundred dollars buys less today than it did last year. Or, to put our monetary history in perspective, what five dollars bought in 1914, when the Fed first opened its doors, today costs about one hundred dollars. A wage increase might make up some lost ground, but people on fixed incomes don’t get wage increases, so they’re out of luck. Also, prices typically rise faster than wages during an inflationary period. …
Because Fed-created money enters the economy at particular points (through banks and bond dealers), a select few people get it sooner than the rest of us. Those who are thus privileged are able to buy at the old, lower prices, while the rest of us don’t see the money until prices have risen. That is an implicit tax and transfer.
And the problem isn’t simply a rising price level. Relative prices are what provide entrepreneurs and investors the information required for rational economic calculation and service to consumers. Inflation changes relative prices. Thus, it distorts the price system and, in turn, the multidimensional economic structure. That means any stimulus is unsustainable because the inflationary policy will eventually end and unemployment must follow as the inflation-induced errors are revealed.
Inflation serves the governing class. Honest, hardworking people should abhor it.
On top of everything, the state keeps about half of what every person earns through social security, medicare, income taxes, sales taxes, etc.
Which brings us to the common thread amongst all these impediments: the state.
The state is what makes goods artificially expensive. The state makes employees much more expensive for an employer to hire than what the employee will ultimately be paid (I’ll have a post on this soon). The state devalues the purchasing power of every dollar we hold.
Now, I absolutely grant that many rich have gotten richer at a higher pace than the rest of us for some years now. While not necessarily a problem in and of itself, it is the truth - and a symptom of a larger issue: this is precisely because of the generous benefits afforded them by the leviathan state the left views as the savior of the common man.
And, again, the Federal Reserve is the biggest facilitator of this massive theft from the common man to the wealthy and connected: that’s the state’s true redistribution of wealth. Expecting the state to be otherwise is pure naiveté.
So long as there are centers of power, those with means will aim to wield that power or work it in their favor. And there’s no greater power than the state’s monopoly on force. The state, therefore, will always serve the interests of the connected few above the masses.
As I’ve noted:
If government cannot impose taxes or offer tax breaks, impose tariffs or offer subsidies, impose regulations or offer liability protections, impose fees and licensing or offer interest-free loans, impose wage and price controls or offer bailouts - then what good is it for a corporation [or the rich] to control the government?
It is the state that is zero-sum. What it gives it must first take, and the givers and takers are usually decided by the connected.
The state is no friend to the poor, nor - as I’ve hopefully shown - no friend to the common man. Turning to monopolized authority to centrally plan people out of poverty and hardship only leads to more poverty and hardship.
The Federal Reserve was created in 1913, and during its first 73 years it grew its balance sheet in turtle-like fashion at a few billion dollars a year, reaching $250 billion by 1987—-at which time Alan Greenspan, the lapsed gold bug disciple of Ayn Rand, took over the Fed and chanced to discover the printing press in the basement of the Eccles Building.
Alas, the Fed’s balance sheet is now nearly $4 trillion, meaning that it exploded by sixteen hundred percent in the last 25 years, and is currently emitting $4 billion of make-believe money each and every business day.
So we can summarize the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government which are domiciled there—-that is, the warfare state, the welfare state and the central bank.
What is flailing, by contrast, is the vast expanse of the Main Street economy where the great majority has experienced stagnant living standards, rising job insecurity, failure to accumulate any material savings, rapidly approaching old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut.
And what is positively falling is the lower ranks of society whose prospects for jobs, income and a decent living standard have been steadily darkening.
I call this condition “Sundown in America”. It marks the arrival of a dystopic “new normal” where historic notions of perpetual progress and robust economic growth no longer pertain. Even more crucially, these baleful realities are being dangerously obfuscated by the ideological nostrums of both Left and Right.
Contrary to their respective talking points, what needs fixing is not the remnants of our private capitalist economy —-which both parties propose to artificially goose, stimulate, incentivize and otherwise levitate by means of one or another beltway originated policy interventions.
Instead, what is failing is the American state itself——a floundering leviathan which has been given one assignment after another over the past eight decades to manage the business cycle, even out the regions, roll out a giant social insurance blanket, end poverty, save the cities, house the nation, flood higher education with hundreds of billions, massively subsidize medical care, prop-up old industries like wheat and the merchant marine, foster new ones like wind turbines and electric cars, and most especially, police the world and bring the blessings of Coca Cola, the ballot box and satellite TV to the backward peoples of the earth.
In the fullness of time, therefore, the Federal government has become corpulent and distended—-a Savior State which can no longer save the economy and society because it has fallen victim to its own inherent short-comings and inefficacies. …
What is really happening is that Washington’s machinery of national governance is literally melting-down. It is the victim of 80 years of Keynesian error—-much of it nurtured in the environs of Harvard Yard—— about the nature of the business cycle and the capacity of the state—-especially its central banking branch—- to ameliorate the alleged imperfections of free market capitalism.
As to the proof, we need look no further than last week’s unaccountable decision by the Fed to keep Wall Street on its monetary heroin addiction by continuing to purchase $85 billion per month of government and GSE debt.
Never mind that the first $2.5 trillion of QE has done virtually nothing for jobs and the Main Street economy or that we are now in month number 51 of the current economic recovery—- a milestone that approximates the average total duration of all ten business cycle expansions since 1950. So why does the Fed have the stimulus accelerator pressed to the floor board when the business cycle is already so long in the tooth——and when it is evident that the problem is structural, not cyclical? …
The answer is capture by its clients,that is, it is doing the bidding of Wall Street and the vast machinery of hedge funds and speculation that have built-up during decades of cheap money and financial market coddling by the Greenspan and Bernanke regimes. The truth is that the monetary politburo of 12 men and women holed up in the Eccles Building is terrified that Wall Street will have a hissy fit if it tapers its daily injections of dope.
So we now have the spectacle of the state’s central banking branch blindly adhering to a policy that has but one principal effect: namely, the massive and continuous transfer of income and wealth from the middle and lower ranks of American society to the 1 percent.
The great hedge fund industry founder and legendary trader who broke the Bank of England in 1992, Stanley Druckenmiller, summed-up the case succinctly after Bernanke’s abject capitulation last week. “I love this stuff”, he said, “…. (It’s) fantastic for every rich person. It’s the biggest redistribution of wealth from the poor and middles classes to the rich ever”. …
If this sounds like the next best thing to legalized bank robbery, it is. And dubious economics is only the half of it.
… [T]he other side of the virtually free money being manufactured by the Fed on behalf of speculators is massive thievery from savers. Tens of millions of the latter are earning infinitesimal returns on upwards of $8 trillion of bank deposits not because the free market in the supply and demand for saving produces bank account yields of 0.4 percent, but because price controllers at the Fed have decreed it.
For all intents and purposes, in fact, the Fed is conducting a massive fiscal transfer from the have nots to the haves without so much as a House vote or even a Senate filibuster. The scale of the transfer—-upwards of $300 billion per year——causes most other Capitol Hill pursuits to pale into insignificance, and, in any event, would be shouted down in a hail of thunderous outrage were it ever to actually be put to the people’s representatives for a vote.
Read the whole thing; it’s well worth your time.
I had the pleasure of spending some time today with a clear thinker and communicator. This individual (someone I had heard of but had never met) had expressed an interest in our business model and asked for an hour to learn more. After listening for 45 minutes (without saying much of anything, only asking questions) one of his/her assistants appeared. For the next five minutes, I was witness to something quite remarkable. The essence of the previous 45 minutes was presented by this individual to the assistant without any gaps, nothing omitted.
Clear and concise minds like this never cease to amaze me. My good friend and lawyer who masterminded our partnership structure at the surgery center has a mind like this. Extremely complex agreements and contracts frequently encompass an entire two pages when penned by him. The great political writer, Joe Sobran wrote like this, writing single sentences that spoke more than entire pages someone else would write.
I confess that while I try to be concise and clear in my writing, I am constantly guarding against being otherwise. If and when I am not clear or concise, it is a result of my grappling with my abilities as a writer. Not educated or trained to write, efficiency of word use and clear expression does not come naturally to me. When I read some of my early blogs, however, I can see that I have improved, although I hope to continue to improve.
I am writing this because I recently viewed an individual talking about healthcare on a national network, who was intentionally unclear and imprecise. This has to be because he has something to hide or rather that he believes that his vague and opaque remarks somehow make him look more intelligent, since no one could possibly understand what he said or meant. It made me think of my dad’s favorite saying: ”eschew obfuscation.”
Health care in this country is a mess. Making us all believe that it is an incomprehensible and complex mess, the mission of the architects of health propaganda, has made these same folks and many of their cronies quite wealthy. Whenever you hear one of the countless talking heads talking about the business or the delivery of health care in hard to understand terms or language, your skeptic radar should go on red alert. The truth is that people like this don’t want you to understand. They don’t want you to know the truth. They don’t want you to think about PPO repricing or the uncompensated care scam or the countless kickbacks or the duplicitous book keeping practices that are commonplace in the industry. They don’t want you to know because as long as you don’t know, you won’t know how to ask how they are scamming all of us.
The economics and delivery of health care are no different than the economics and deliver of any other products and services. Industries that are heavily subsidized and regulated benefit those behind the subsidies and regulations, health care included. Part of the reason we put our prices online 4 years ago was to show that it could be done. We have done it and are profitable at prices less than what Medicaid pays the local hospitals for the same procedures. We are profitable at less than half what Medicare pays the big hospitals for the same procedures.
Watch out for those who speak of medical price transparency as an impossibility. Soon after beginning their remarks, the terms they use will become unfamiliar and they will speak in abbreviations and increasingly use acronyms. They will speak of “this complex industry” with increasingly complex speech. Most of the time this is intentional, devious and deceptive, meant to protect the cronies and folks behind the curtain who wish to remain undiscovered, lest their scams be known.
G. Keith Smith, M.D.
The problem with all this is, of course, that one painting by an expressionist Swiss artist who’s been dead since 1966 costs slightly less than the entire roster of his professional baseball team. The one he threatened to move to San Antonio unless Miami-Dade’s taxpayers bought him a snazzy new ballpark. The one he keeps dismantling for “financial” reasons.
All stadium deals are a transfer of wealth from the common taxpayer to a billionaire owner, bureaucrats, and unionized contractors - all under the convenient cover afforded it by the farcical Keynesian concern for “aggregate demand.”
Anyone searching for a case study to explain what is wrong with capitalism in America today can stop looking. We have the perfect specimen: Tesla Motors. Federal and state programs have conferred huge advantages to help the electric-vehicle company sell its cars — which state laws then make almost impossible to sell.
Left to its own devices, Tesla one day might have epitomized everything good about market economics. In an industry whose fundamentals have changed little since the introduction of the Model T, the California-based company, led by the visionary Elon Musk, made a long-term bet that it could prevail through disruptive innovation and superior products (Motor Trend named its Model S the 2013 Car of the Year, and Consumer Reports raved about it). Instead, Tesla now epitomizes the folly of government intervention.
Start with all the special benefits Tesla receives — including a $465 million loan from the Energy Department, conferred in January of 2010. That is two-thirds more than Tesla initially raised from private investors, and more than double the $226 million the company raised from its initial public offering five months later, even though the loan surely encouraged investors to buy.
On top of the loan, add the $7,500 federal tax credit for purchasing electric vehicles. That amounts to a discount of more than 10 percent for the base Model S, whose purchase price is a hefty $70,000. Many states also offer their own incentives, including tax rebates, property tax reductions or exemptions, and sales tax exemptions worth thousands of dollars more. Some states also offer perks such as exemption from annual inspection requirements and use of HOV lanes.
And then there is California, a world unto itself. Not only has California given Tesla a $10 million grant, it has ordered car makers to sell an increasing number of electric vehicles; Gov. Jerry Brown insists that 1.5 million zero-emission vehicles ply the state’s roads by 2025. (“Zero-emissions” is a grievous misnomer, since electric vehicles need charging, and all power plants produce emissions. In fact, electric vehicles in regions where coal makes up a large share of the generation capacity are more carbon-intensive than high-mpg cars with internal combustion engines.)
But there are two problems with setting quotas for electric vehicles. Most car makers don’t manufacture them. And so far, most consumers don’t want them — even with the large financial inducements. So California lets other car makers meet the rule by purchasing credits from EV makers, which for now means Nissan and Tesla.
In August, the left-wing Mother Jones magazine reported that Tesla’s profits in the first and second quarters of 2013 — its first profits ever — would have been losses if not for the tens of millions it has collected through the credit-purchase program.
Still, some people who can afford to do so want to buy Teslas. Unfortunately, states across the country are doing their best to stop them.
In Virginia, for instance, you can visit the company’s showroom in Tysons Corner to kick the Tesla tires. But until recently that was about all you could do. You couldn’t take a Tesla for a test drive. The company reps couldn’t even discuss pricing with you. And you absolutely, positively could not buy a Tesla then and there.
Those restrictions still exist in most other states: Forty-eight states forbid Tesla to sell cars directly to consumers, which is how the company likes to do business. (Tesla has a variety of reasons for that: Among them, the company charges a single flat price for its cars, but couldn’t sustain such a policy if middlemen got involved.) And independent automobile dealers are fighting furiously to keep Tesla out of their backyards.
Texas’ rules resemble Virginia’s. In New York, lawmakers introduced legislation that would have shut down Tesla’s three locations by forbidding the registration of any vehicle not purchased through a dealer. In North Carolina, the State Senate passed a bill to forbid vehicle sales except through a franchised dealer.
Both of those measures ultimately failed, but until a couple of days ago, when a lawsuit-averting deal was announced, Tesla had not been able to win an exemption from Virginia’s rules. Some Virginia dealers wanted to keep it that way. “Tesla believes it should be allowed to sell cars without licensed dealers. This can’t be,” wrote Gerard Murphy in The Washington Post earlier this year. Murphy is president of the Washington Area New Auto Dealers Association, whose members include dealerships in Northern Virginia. “If Tesla won’t have a dealer network, it doesn’t belong in the automobile business.”
The dealers contend they are simply trying to protect local jobs and the welfare of the consumer. But their motives are not solely altruistic. If Tesla succeeds in challenging the franchise model, other car makers might do the same — and then dealerships would be in for a world of hurt. They would still make money, but probably nowhere near as much as they do now.
That’s rough on them — but it’s no rougher than the transition other industries have endured in recent decades. And the rationales the dealers offer to justify government-enforced protection of their turf make no more sense than similar justifications would make in other industries. Imagine, for instance, if states insisted that bloggers and advertisers who want to reach the public could do so only through newspaper websites, in order to preserve local jobs and the fact-checking process. That’s the sort of nonsense the dealers in other states are peddling now.
But then, there’s very little good sense in the tale of Tesla — a company that government advances with special preferences one moment, and impedes with schemes for the protection of market incumbents the next. Tesla’s cars might qualify as revolutionary. But its treatment at the hands of big government is as old as Appian Way.
Five years after the housing and financial meltdown, self-styled progressives are still peddling their pseudoexplanation: that it was largely the fault of the 1999 repeal of a provision of the New Deal–era Glass-Steagall Act, which mandated the separation of commercial and investment banking. This tale is favored by Sen. Elizabeth Warren and others of her ilk, who hold the rather absurd view that the United States had free banking between the 1980s and the passage of Dodd-Frank in 2010. …
One wonders if Warren et al. ever bother to look at the facts, particularly the passage of Glass-Steagall and what, if any, role the repeal actually played in the crisis. Since they never say anything specific, it’s hard to know if this is anything more than an incantation designed to blame the “free [sic] market” and to bolster their case for bureaucratic management of our lives (which they call “the economy”). It takes Herculean ignorance or dishonesty to claim that America had free banking before 2010. Hence, this is a classic confirmation of my observation that no matter how much the government controls the economic system, any problem will be blamed on whatever small zone of freedom remains. …
Many people are determined not to see the government’s central culpability in the crisis that produced and continues to produce so much hardship. They rather believe that deregulation and greed were the culprits. But the fact remains: Wall Street couldn’t have done it alone.
Feds Spend Over Half a Million in Research Money on Pharma Cure for Nonexistent "Marijuana Addiction" →
Big Pharma and the government, sitting in a tree…
The pretense of precision is only one of the fantasies we expect of our Fed chairs. Another illusion we all pay homage to is the independence of the Fed. But the chair of the Fed responds to political incentives just like everyone else. Those political incentives dwarf almost everything else—which is why it is so foolish to parse past pronouncements of Yellen trying to figure how where she will fall on the dove-hawk spectrum or how she will treat Wall Street.
Is it likely that Yellen will stop paying interest on the reserves that banks hold at the Fed? I wish it were otherwise, but the answer is likely to be no.
When the next crisis comes and big banks fail, will she force their creditors to lose a lot of money or any at all? That would stop the music on Wall Street and kill the easy leverage the investment banks enjoy. I wish it were otherwise, but I think she will keep that music playing.
If inflation comes and it is near an election, will she step on the monetary brakes risking unemployment to avoid a higher inflation rate? I would be surprised.
Here is how powerful the incentives are. When an acolyte of Ayn Rand became chair of the Fed, an alleged advocate for government keeping its hands out of the private choices of free individuals, he relentlessly sheltered investors via monetary policy (the Greenspan “put”) and relentlessly sided with the big banks.
So yes, he opposed regulation—”a free-market ideologue” the critics chorused. But the ideologue also testified before Congress in support of the government guarantee of Mexican debt in 1995, calling it a bad policy but a necessary one and insuring that the large banks that had financed the debt of the Mexican government lost not a penny. When his ideology conflicted with helping the banks, he helped the banks.
Bernanke has been even kinder to the banks. He comes from Princeton. He’s not a conservative or a free-market ideologue. You might think he’d be a little more populist. But when push came to shove, he took skin out of the game for the financial sector and replaced it with your skin and mine, against our will.
Yellen is from UC-Berkeley. But I would expect her to follow the same policies as her predecessor, not because they are right—the coddling of banks is very wrong, in my opinion—but because the political forces will encourage her to lean not left and not right, but north, toward New York City and Wall Street.
I would love to be wrong. I would love for a chair of the Fed to put Wall Street’s skin back in the game, to stop artificially inflating the stock market and to rely more on rules than on discretion. But until the political incentives change, who is chair of the Fed is simply not important as we pretend it is. I expect Janet Yellen to be more of the same.
Today[’s] 3:00 pm nomination by Obama of Janet Yellen as the next Fed chair was hardly news in the aftermath of Larry Summers’ self-elimination, but nonetheless the sellside brigade was quick to praise her now official nomination for one simple reason: it means more of the same Bernanke policies that have done nothing to benefit broad America, but more importantly have resulted in year after year of near-record Wall Street bonuses, and unprecedented asset bubbles. Why shouldn’t the banks then be giddy with excitement that the status quo will not only continue, but the monthly $85 billion in liquidity may in fact increase in time?
Mobsters shake down, say, a restaurant owner. They drink all the booze and eat all they want and pay nothing. They rob the cash register. They even go out and borrow money against the place and spend it. When they’ve finally bled the thing dry and the business is about to collapse, they burn the place down and collect the insurance money.
That’s pretty much what Goldman Sachs did to AIG. The taxpayer footed the bill. …
Now, you might claim the taxpayer made money on the deal, as was widely been reported late last year. The idea is ridiculous, because AIG was clearly a heist in which AIG had no choice and the price offered was a fire sale price. (Not that we should feel sorry for AIG, which was a gangster firm with its own crooks). Besides, where is the check for the taxpayer? I never got it. The truth is the government used our money for free and taxpayers will never see it. …
Think Obamacare is a socialist redistribution scheme? Take another look. What it really amounts to is the largest corporate giveaway and pork-filled legislation in the history of the country. …
Follow the money:
1.) Police Unions: Police departments across the country have become dependent on federal drug war grants to finance their budget. In March, we published a story revealing that a police union lobbyist in California coordinated the effort to defeat Prop 19, a ballot measure in 2010 to legalize marijuana, while helping his police department clients collect tens of millions in federal marijuana-eradication grants. And it’s not just in California. Federal lobbying disclosures show that other police union lobbyists have pushed for stiffer penalties for marijuana-related crimes nationwide.
2.) Private Prisons Corporations: Private prison corporations make millions by incarcerating people who have been imprisoned for drug crimes, including marijuana. As Republic Report’s Matt Stoller noted last year, Corrections Corporation of America, one of the largest for-profit prison companies, revealed in a regulatory filing that continuing the drug war is part in parcel to their business strategy. Prison companies have spent millions bankrolling pro-drug war politicians and have used secretive front groups, like the American Legislative Exchange Council, to pass harsh sentencing requirements for drug crimes.
3.) Alcohol and Beer Companies: Fearing competition for the dollars Americans spend on leisure, alcohol and tobacco interests have lobbied to keep marijuana out of reach. For instance, the California Beer & Beverage Distributors contributed campaign contributions to a committee set up to prevent marijuana from being legalized and taxed.
4.) Pharmaceutical Corporations: Like the sin industries listed above, pharmaceutical interests would like to keep marijuana illegal so American don’t have the option of cheap medical alternatives to their products. Howard Wooldridge, a retired police officer who now lobbies the government to relax marijuana prohibition laws, told Republic Report that next to police unions, the “second biggest opponent on Capitol Hill is big PhRMA” because marijuana can replace “everything from Advil to Vicodin and other expensive pills.”
5.) Prison Guard Unions: Prison guard unions have a vested interest in keeping people behind bars just like for-profit prison companies. In 2008, the California Correctional Peace Officers Association spent a whopping $1 million to defeat a measure that would have “reduced sentences and parole times for nonviolent drug offenders while emphasizing drug treatment over prison.”
Three federal judges overseeing California’s prison system granted the state a four-week extension to get the prison population down to 137.5% capacity. In 2011, the United States Supreme Court ruled in Brown v Plata that the “court-mandated population limit is necessary to remedy the violation of prisoners’ constitutional rights.” In the two years since the ruling, California has scrambled to figure out how to reduce the prison population from a high of 144,000 to a constitutionally acceptable figure of approximately 110,000 inmates. The prison population is currently around 120,000, not including over 8,500 in out-of-state contracted facilities or thousands of others working in fire camps. California now has until the end of January 2014 to meet the court order.
They could start by releasing everyone in prison for non-violent drug possession. Ending the war on drugs, “three strikes” laws, and mandatory minimums would certainly get the ball rolling.
But that presumes that (1) the rights of citizens and (2) saving taxpayer money are actual concerns. In truth, like all government action, the injustice system is catered to extend power and wealth to the state and its cronies. There are too many people getting rich off the system for change to be easy. Sure enough:
Instead of talking about sensible sentencing reform, California approved a $300 million spending bill to authorize the expansion of contract beds in and out-of-state to ease overcrowding.
You can always count on them to spin things in their favor. As with all failed government programs and policies - the solution is always to throw more money at it. Like Obama’s then-chief of staff Rahm Emanuel said: “You never want a serious crisis to go to waste.”