Getting Screwed

You probably already suspect that you are being screwed as a result of the tax giveaways for the wealthy in the so-called "Big Beautiful Bill Act," but did you realize that Der Furor's trade policies are also screwing ... screws?

I call your attention to this article from the New York Times: [Der Furor’s] Tariffs Are Damaging America’s Biggest Foreign Source of Screws. It seems that Taiwan, which every year exports to the United States tens of millions of screws in thousands of different types is being hammered by Der Furor's tariffs on steel, aluminum, and finished screws, with orders to a typical factory down nearly 20 percent compared with the same time last year. 

The goal of Der Furor's tariff policy - to the extent that it has a definable one - is to bring in vast amounts of money to fund tax cuts for the rich while permitting American manufacturers to recreate domestic sources of manufactured goods ... like screws. To some extent, as the article points out, that is happening. But American manufacturers in the short term cannot produce the millions of screws in thousands of different types that Taiwan can, at least not until more factories are built and domestic (i.e., tariff-free) sources of steel and aluminum are developed. And, of course, domestically-produced screws will be more expensive because of higher labor costs and the investments to be made in new factories. Trust me, say Der Furor and his economic advisors ... it'll all work out. Short-term pain is worth it when you look at the magnificent manufacturing future shimmering on the horizon.

I have in my garage, as do most average do-it-yourselfers, a vast number of screws in assorted lengths, diameters, styles, and materials, left over from various projects over the years. But Bilbo's First Rule of Do-It-Yourselfing (which has never been wrong yet) says that "Regardless of how many screws and nails you have, you will not have the ones you need for whatever you are doing." This - not overpriced power tools - is what keeps Home Depot, Lowes, and smaller hardware stores in business. And as screw prices keep going up, first because of tariffs and later because they're more expensive to make domestically, you'll keep feeling that big economic screwing get more painful.

Buy your screws now ... it'll minimize the screwing you'll get later.

Have a good day. More thoughts coming.

Bilbo

"Housing Crisis"

 

I bought my first house in 1983. It was a three-bedroom, four-bath (two full baths, two powder rooms), three-level, end unit townhouse in Northern Virginia, and it cost $68,200. I sold it three years later for about $120,000. According to Zillow.com, that house today is worth $500,100. A new townhouse development not far from our home is advertising homes "from the $800s*."

Riddle me this, Batman: if you are a low- to middle-income wage earner, whether single or with a family, how do you afford a home at these prices ... which, of course, do not include insurance, utilities, or taxes (all quite high in many areas)? And, having paid for all that, how do you afford other frivolous things like food, clothing, medical care?

We do not have a "housing crisis" ... we have a housing affordability crisis. 

There are many reasons for this, including:

1. Inflation, aka "Greed." See my earlier blog post on the topic.

2. Purchase of multiple homes by wealthy investors and used as rental properties, and the calculated deflection of responsibility for the cost increases.

3. Overconstruction of huge, expensive "McMansions" marketed to more affluent purchasers, at the expense of smaller, less expensive homes affordable for couples or small families with lower incomes.

4. Wages that do not allow workers to afford adequate housing

That the nation has a serious shortage of affordable housing is reflected in the problem of homelessness that plagues our cities. Der Furor - offended by the presence of homeless persons and homeless encampments in Washington, DC - has deployed an alphabet soup of federal law enforcement agencies and National Guard forces from multiple states to the streets of the capital to remove unfortunate persons who often have nowhere else to go. Out of sight, out of mind.

The presence of homeless persons on our streets is a scandal unworthy of a great nation. A real president, rather than an incompetent, posturing, authoritarian buffoon, would address the causes of homelessness - among them the outrageous cost of housing, zoning rules that prevent the construction of the types of housing most needed, and a lack of mental-health support for those in need, especially homeless veterans - rather than its symptoms.   

Simply publishing more royal decrees executive orders** won't solve the problem. Only action to address the root causes will. But don't expect it from this administration.

Have a good day. If you are fortunate enough to afford a place to live, enjoy it ... too many of your fellow citizens are not so lucky.

More thoughts coming.

Bilbo

* Realtors and developers are reluctant to actually say "Eight hundred thousand dollars and up."

** Executive Order 14321, "Ending Crime and Disorder on America's Streets," is not a substitute for effective, broad-based action, but it sounds good to the MAGAts.

Greed, Inflation, and the Personalized Cost of Living

I will admit up front, as I often have in the past, that you could put everything I know about economics into your navel and still have room for a herd of elephants and a brass band. But the more I think about the subject, the more I have come to believe that much of it is a scam based on human behavioral psychology. A good specific example of this is the concept of inflation, which the International Monetary Fund defines this way:

"Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country. But it can also be more narrowly calculated—for certain goods, such as food, or for services, such as a haircut, for example. Whatever the context, inflation represents how much more expensive the relevant set of goods and/or services has become over a certain period, most commonly a year."

Economists tell us that inflation is a feature, rather than a bug - a constant force to be managed by professionals who adjust interest rates, tinker with the money supply, apply or adjust tariffs, etc. I, however, expert economist that I am, think that there's a much more simple reason for inflation: greed.

I've thought about this a lot lately, most recently when I saw this amazing article by Irina Ivanova in Fortune magazine: Delta Moves Toward Eliminating Set Prices in Favor of AI That Determines How Much You Personally Will Pay for a Ticket. Yes, Dear Readers, if you fly on a Delta flight, the price you pay will be calculated by an AI algorithm that determines the maximum amount it expects you can afford. Or, to paraphrase an often-attributed quote: plucking the maximum number of feathers from the goose with the smallest amount of hissing. This is not inflation. This is raw, unashamed greed.

Much of what we automatically blame on "inflation" is nothing more than greed, couched in the lofty language of economic laws and forces like "supply and demand" or "charging what the market will bear." It's why you can't afford to buy a house, why your weekly food budget is gone by Wednesday, and why you can pay for decades and your student loan balance is still in five figures. It's greed, and we accept it because it's easy to shrug and blame "inflation" for which there is no justification*.

Greed. It's the only law of economics you need to know.

Have as good a day as those who make the economic law will let you afford. More thoughts coming.

Bilbo

* I can see the price of something going up if there's a rational explanation for it ... for instance, if a particular mineral needed to build a widget is now harder to mine because the easily accessible deposits are exhausted, the cost of extraction may be greater. I can get that. But if the underlying costs don't change, greed is the only rationale for raising prices.

The Cross of Electrons

On July 9, 1896, William Jennings Bryan delivered what many historians consider the greatest political speech in American history - his famous "Cross of Gold" speech. 

At the time, the United States dollar was unofficially on the gold standard used by major trading nations. This made trade simpler, but limited the money supply, leading many businessmen and economists to advocate for "bimetallism," or the coinage of silver as well as gold. Mr Bryan, seeking the Democratic nomination for president, was a strong advocate for the free coinage of silver, as opposed to his Republican opponent, William McKinley*, who advocated remaining on the gold standard. Although Mr Bryan eloquently insisted in his famous oration that "you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold," he lost the election of 1896 to Mr McKinley, who officially placed the United States on the gold standard in 1900. The nation remained on the gold standard until 1933, when President Franklin Roosevelt ended it for domestic transactions, and 1971, when President Richard Nixon ended the international convertibility of the dollar to gold, effectively ending the gold standard for global transactions. The dollar is now considered a "fiat currency," with its value determined by market forces rather than the value of a physical commodity like gold. 

And now we find ourselves in 2025, when a new form of currency has arisen - the so-called "cryptocurrencies" like Bitcoin, the value of which is tied not to some physical asset, but to the market forces of supply and demand.

I wrote about cryptocurrencies in March of this year, when I commented on Der Furor's royal decree Executive Order 14233, "Establishment of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile." I noted at the time that there were six attributes a fiat currency (like the dollar) required to be acceptable as a medium of exchange:

Durability - it must stand up to use;

Portability - it must be able to be moved around as needed;

Divisibility - it must be conveniently divisible into smaller units as needed;

Uniformity - each unit must look like and have the same value as every other unit;

Scarcity - the value is shored up by limits imposed on the quantity available; and,

Acceptability - users both at home and in other countries agree to take it as payment.

One can argue whether any cryptocurrency meets those requirements, as I discussed in my earlier post. All things considered, I don't believe that cryptocurrencies (at least, as they now exist) are a viable unit of exchange. Of course, I'm hardly an expert on the topic ... but then again, neither is Der Furor or anyone in his fiscal entourage.

And an economy weakened by economic blows like the ongoing tariff chaos and relentless focus on tax reductions drives investors from the dollar, once the world's preferred reserve currency, to alternatives like cryptocurrencies ... benefiting those who produce or invest in those cryptocurrencies. Like Der Furor, oddly enough. 

I fear we are no longer in danger of being financially crucified on a cross of gold, but rather on a cross of electrons.

I wonder what Mr Bryan would have had to say if he were giving his famous speech today.

Have a good day. Don't take any wooden nickels. Or electronic ones, either. More thoughts coming.

Bilbo

* Mostly remembered today for his advocacy of tariffs and consequent deification by Der Furor.

The President's Budget, 2025

Long ago, the United States government had a process by which the president and Congress worked together to develop a budget to determine how much money it spent, and on what. The last time that formal budget process worked was 1994, when then-President Bill Clinton signed all 13 appropriations bills before the start of the new fiscal year. Since then the United States has not had a single year in which the president proposed and Congress successfully marked up, debated, and passed a formal budget for the president's signature. For the last 30 years, the federal government has relied on continuing resolutions and gigantic, opaque omnibus packages, rather than the budget process, to keep itself going. 

Der Furor submitted his "Skinny Budget" last Friday, cutting virtually all domestic programs - programs that actually help people - by 23% of the previous level, or $163 billion. In the words of the White House press release, it "guts a weaponized deep state* while providing historic increases for defense and border security." The press release goes on to quote  OPM Director Russell Vought's justification of the budget proposal:

“For decades, the biggest complaint about the Federal Budget was wasteful spending and bloated bureaucracy**. But over the last four years, Government spending aggressively turned against the American people and trillions of our dollars were used to fund cultural Marxism, radical Green New Scams, and even our own invasion. No agency was spared in the Left’s taxpayer-funded cultural revolution. At this critical moment, we need a historic Budget—one that ends the funding of our decline, puts Americans first, and delivers unprecedented support to our military and homeland security.  The President’s Budget does all of that.”

Does this budget proposal actually put Americans first by cutting non-discretionary spending by an average of 35%? Let's see ...

Education? Cut by 15%. States and churches (speaking of indoctrination) need to take care of it, whether they can afford it or not. Der Furor is on record as loving the poorly educated, anyway.

Public Health? Cut by 26%. Why should anyone but you be responsible for your health? As Ebenezer Scrooge once remarked***, "If they would rather die they had better do it and decrease the surplus population."

Disaster Preparedness? Slashed. States need to take care of themselves, whether they can afford it or not.

Climate-Related Programs? Slashed. After all, according to OMB Director Vought, they are “antithetical to the American way of life.” I'm not quite sure how that is, but I'm sure it sounds as good to the average MAGAt as the right to bear arms.

National Park Service? Cut by 31%. Parks are located in the states, and the states should pay for them. And once we log out all those useless forests, there'll be no need for a park service, anyhow.

Foreign Aid? Cut by 84%. Better to spend that money on Americans at home ... oh, wait ... we're not going to spend that money on Americans at home, anyhow. Never mind.

National Endowment for the Arts? Eliminated. Why should we pay for cultural stuff that suckers in other countries have already paid for^†? 

Libraries? Support wiped out. Who needs all that accumulated knowledge, even though "do your own research" is a mantra of the suspicious right?

So, how are we spending all that money we're going to save by eliminating things Der Furor doesn't like? As the White House press release explains,

"Defense spending would increase by 13 percent, and appropriations for the Department of Homeland Security would increase by nearly 65 percent."

Somewhere in that defense spending is the cost of Defense Secretary Pete Hegseth's makeup studio in the Pentagon, while the DHS increase probably covers part of the cost of transporting and protecting Der Furor during his frequent golf outings.

Is there fraud and waste in government spending? Of course there is. Is it best addressed by eliminating inspectors general in government agencies? Hardly. Neither is it best addressed by evidence-free accusations couched in highfalutin' language that appeal to the MAGA faithful.

Do the American taxpayers save money when their state level taxes go up to compensate for services their federal taxes used to pay for? I'm reminded of the old joke about daylight savings time being the same as cutting off the bottom half of one's blanket and sewing it onto the top to make the blanket longer.

There are worthwhile discussions to be had about what the federal government should do and pay for, and what should be the responsibility of the states. Instead of having those discussions, coming to agreement on the proper division of responsibilities, and crafting federal budgets that allow states to properly plan and craft their own budgets, we have a ham-handed meat-ax approach to budgeting that serves no one except those who are more interested in cheap politics than in a functioning, well-funded government that fulfills the Constitutional aspiration to:

"... form a more perfect union, establish justice, provide for the common defense, promote the general welfare, and secure the blessings of liberty ..."

We've got a long way to go, and Der Furor isn't going to get us there, at least not with our economy and our civil rights intact.

Have a good day, and let me know in your comments what you think the division of labor should be. What should the federal government do and pay for, and what should be the responsibility of the states? Why?

We'll have this discussion in an upcoming post. More thoughts then.

Bilbo

* It's worth remembering that all that "wasteful spending and bloated bureaucracy" was approved by Congress in earlier budgets.

** See this earlier post for an opinion on who's actually weaponizing the government against whom.

*** A Christmas Carol, by Charles Dickens.

† If you need arts and culture, go to the Louvre, the Bolshoi Ballet, the British Museum, the Egyptian Museum, and all those other useless places funded by radical lunatic losers.

Everything's Dynamic

The Merriam-Webster dictionary defines dynamic as "marked by usually continuous and productive activity or change; energetic, forceful." It's a very useful word for our our current political-economic situation.

In the realm of economics, dynamic pricing is the practice of adjusting prices in real-time* based on factors like supply, demand, customer behavior, and market conditions, so as to optimize revenue and maximize profit.

The word dynamic is derived from the Greek word dynamis, meaning "powerful," which also gives us the word dynamite. This is, of course appropriate, because dynamic pricing blows large holes in your budget by sneakily bumping up the prices of things from minute to minute.

You can easily tell which stores are using dynamic pricing to fleece you by looking at the price labels on their shelves - if they're digital rather than traditional clip-ons, they're intended to facilitate those dynamic changes in the price of the things you buy. And you know in your heart that those prices never go down.

In the realm of politics, I think that the word dynamic - indicating the ability to change rapidly - is also useful for apologists in need of a weasel word to describe Der Furor's economic policies (such as they are), as dynamic sounds so much better than chaotic or slapdash. It's also very useful for the Department of Justice, administration lawyers, and the Orange Airhorn's mouthpieces as they dynamically revise the meaning of the Constitution, the law, and what we have previously understood to be our Constitutionally-guaranteed personal freedoms.

The word of the day is dynamic. That's all. Be wary of people using it.

Have a good day. More thoughts coming.

Bilbo

* Not to be confused with "House-of-Representatives-Time," which uses a very flexible definition of "day."

Inconvenience Fees

Last weekend we had lunch with our granddaughter at a local Italian restaurant. When the bill arrived, I noticed that a convenience fee had been added to the total because I was paying with a credit card. This is a pretty common thing now, as restaurants try to recoup the amount they must pay to the services that process the credit card charges. It's annoying, but I figure that some portion of those fees the restaurants pay eventually comes back to me in the monthly cash-back benefits I enjoy.

But the larger issue is that every business has now decided that convenience fees are a nice revenue stream, to the point that they've become inconvenience fees for those of us forced to pay them ... and if you thought the Consumer Finance Protection Bureau* was going to help out with them, well, forget it ... President Musk has decided that protecting consumers is a waste of money and has shut it down.  

You may recall that I established my own schedule of fees a few years ago, and last updated it in December of 2023. It looks like it's time to update it yet again, especially now that President Musk and PINO** Der Furor are likely to get rid of the Social Security and Medicare on which I largely depend for my continued existence ...  

Bilbo's Updated Fee Schedule

(effective March 10, 2025)

General Guidelines: All fees are payable in advance and on the spot either in cash, by certified check, or direct bank-to-bank transfer. No personal checks, credit cards, IOUs, foreign currency (except Euros), or cryptocurrency accepted. No refunds. An additional Nuisance Charge of $15 is also assessed for each request for further explanation of any of the listed charges.

Part 1: General Fees

General Annoyance Mitigation Surcharge (GAMS) - a one-time charge of $100 to partially compensate me for the waste of my valuable time. Note: this base fee is always applied in addition to any other applicable fees and surcharges.

Stupidity Exposure Mitigation Surcharge (SEMS) - a one-time charge of $250 per annoying robocall or home visit, intended to help cover the cost of aspirin and blood pressure medication. Note: this fee is applied in addition to any other applicable fees and surcharges.

Concentration Interruption Fee (CIF) - a flat fee of $25 for each unsolicited telephone call or visit by a door-to-door solicitor which interrupts what I am doing. This is derived from the "billable hour" fee concept used by lawyers, according to which an interruption may only actually involve a minute or two of work, but is charged the full hourly rate because it interrupts the flow of their attention and allegedly requires the rest of the full hour for them to get back on track. This fee is applied in addition to any other applicable fees and surcharges.

Bullshit Filtration Surcharge (BFS) - a flat fee of $75 for every political advertisement which airs during a television show or online presentation for which I am paying (through cable or other access fees). Considering the obscene amount of money spent by political campaigns, they can afford it.

Note 1: this surcharge is applied to each individual advertisement ... that is, if two political ads air back-to-back, each is subject to the BFS.  

 

Note 2: the BFS is applied in addition to the SEMS, GAMS, and CIF (see above), and is tripled for advertisements inserted in the middle of a video I was watching.

 

Note 3: the BFS also applies to advertisements for Medicare supplement insurance plans which proliferate each year in November and December. The BFS is doubled for the same ad repeated back-to-back. 

Wasted Appointment Time Recovery Assessment (WATRA) - a fee charged for time spent waiting to be seen after the scheduled starting time of an appointment. Calculated as 20% of the original appointment fee for each 5 minutes past the scheduled appointment time.

Self-Checkout Effort Recovery Fee (SCERF) - 25% of my total bill charged to any store each time I am required to use the self-checkout. If I'm doing the store's work for them, why shouldn't I get paid for it?

Part 2: Religion-Related Fees

Religious Proselytization Fee (RPF) - a flat fee of $75 to compensate for the annoyance of having to get rid of door-to-door religious missionaries. The CIF also applies, as do the following additional charges, as appropriate:

Eternal Damnation Invocation Surcharge (EDIS) - an additional charge of $100 applies if the proselytizer tells me that I will burn in hell if I don't allow myself to be "saved." 

Religious Contribution Solicitation Tax (RCST) - an additional charge of $500 applies if the proselytizer solicits cash donations. The charge is increased to $1000 if the proselytizer represents a megachurch whose leader lives in a mansion and has his/her own television station, fleet of luxury cars, and private jet. The BFS also applies.

Alternative Worship System Denial Fee (AWSDF) - an additional charge of $100 applies if the proselytizer insists on the sole dominance of his/her own faith and demeans or denies the worthiness of any other faith. 

Part 3: Political Fees

Political Party Representative Annoyance Compensation Fee (PPRACF) - a flat fee of $100 charged to any representative of a candidate for office, in addition to the CIF, SEMS, and GAMS. If the candidate himself or herself appears, the fee can be reduced to $50 at my discretion as an incentive for being willing to meet one-on-one with the common folk. The BFS may also be added if the individual invokes debunked conspiracy theories, proven falsehoods, election denial, or Der Furor by name. The following subsidiary charges may also apply:

Election Denial Tax (EDT) - a fee of $500 for refusal to accept the validity of any election the candidate refuses to concede losing. This fee is doubled if the candidate claims in advance that an upcoming election is rigged if he or she loses.

Conspiracy Theory Embrace Fee (CTEF) - a charge of $500 for each invocation of Q-Anon or any conspiracy theory as a substitute for fact-based argument. 

Der Furor Annoyance Abatement Fee (DFAAF) - a charge of $250 for each mention of the Orange Airhorn's name, regardless of context. 

Opponent Castigation Surcharge (OCS) - a charge of $150 for the first instance of blaming the candidate's opponent for something without evidence, or without offering a detailed plan to address the issue. The fee increases to $200 for the second and each subsequent instance.

Political Contribution Solicitation Tax (PCST) - similar to the RCST applied above under the Religious Proselytization Fee. A charge of $1,000 is applied for the gall of requesting campaign contributions from ordinary citizens who are having their own troubles making ends meet, usually as a result of the action (or inaction) of the politician in question. 

Inappropriate Millinery Choice Assessment (IMCA) - a charge of $500 for showing up at my door wearing a stupid red MAGA hat. An additional $50 will be charged for each other number or slogan embroidered on the hat.

This is a partial list, subject to change and update without notice. All charges are cumulative. Get off my lawn.

Have a good, uninterrupted day. More thoughts coming.

Bilbo

* Don't bother clicking on the link ... it's a 404: Page Not Found. President Musk works fast.

** President in Name Only. 

Bilbo's Squeeze-the-Balloon Theory of Political and Economic Promises

As we endure the blizzard of political promises that buffet us from the right and the left in this election season, I thought I'd resurrect my Squeeze-the-Balloon Theory, which can be compared to the old spiritual "Dem Bones." Stripped of all the diagrams and verbiage, the fundamental point is that

Everything's connected

If you listen to any political speeches or read what the parties dare to put into print*, you'll find that they are simply collections of discrete promises. We will lower taxes (on the rich), raise taxes (on the rich), build factories (or bring them back from overseas), create jobs, rebuild infrastructure, build a wall, get rid of Obamacare (or improve it), round up and deport those in the country illegally, beat cancer, support Israel or the Palestinians (or not), support Ukraine against Russia (or not), impose the "Christian" version of sharia law, go to Mars, fight climate change (or forbid any mention thereof), etc, etc, etc. If you're on the far right, those promises are presented in capital letters with multiple exclamation points.

What all these promises, and the actions needed to fulfill them, have in common is that each one is  presented in a vacuum, without consideration of how it relates to all the others. When you squeeze a partially-inflated balloon in one place, it bulges out in another ... 

... thus, my "Squeeze the Balloon" look at political and economic promises. 

Consider this simplified example: 

Workers demand higher wages, consumers demand lower prices, manufacturers demand maximum profits, and stockholders demand maximum return on their investment.

So ...

1. In order to keep profits and shareholder return high and prices low, manufacturers move their production to other countries where labor is cheaper and cost-imposing legal and safety regulations are less onerous than in the United States. 

2. As manufacturing jobs move overseas, domestic factories close and workers lose their jobs.

3. Because laid-off workers now have no income, they cannot afford to buy the products they once made, even at the lower price they originally demanded.

4. Workers without steady income defer necessary medical care or fail to buy health insurance until their conditions become more difficult and expensive to treat. The medical system, straining to treat patients unable to pay for other than emergency treatment (if they can pay for that at all), compensates by raising prices for those who have insurance or can otherwise afford to pay. Medical insurance companies raise their rates, and consumers see their health care costs go up. Further, ill or injured workers aren't as productive as healthy, well-fed ones, which imposes new, less-obvious production costs on their employers.

5. Workers without jobs can't pay their mortgages, buy new homes, or afford ever-increasing rents, which leads to a homeless problem, which leads to health and public safety issues as cities cope with ever-increasing homeless populations.

6. Voters who now have no jobs, income, health care, or places to live vote for candidates who offer scapegoats and simple, one-size-fits-all solutions to their problems**. 

Here's another way to look at it ...

1. Businesses insist that taxes and regulations strangle their viability and profitability.

2. Seeking campaign contributions, politicians promise to slash taxes on businesses and eliminate or not enforce health, safety, and environmental regulations.

3. Falling tax revenue*** must be made up in one of three ways: increase taxes on individuals; cut spending; or borrow money. Each of these has its own drawbacks:

3a. Increasing taxes on individuals (especially at lower income levels), exacerbates the downward pressure on their purchasing power. A corollary of this is the practice in many cities of piling taxes and fees on transient populations that don't vote there (take a look at how many taxes and fees are heaped on your next hotel bill).

3b. Cutting spending always involves reductions in programs that one constituency or another considers vital and will fight tooth and nail to maintain.

3c. Borrowing pushes the pain into the future, when loans and their attendant interest must be repaid with money that has to be raised by increasing taxes, cutting spending, or ... borrowing more money.

4. Eliminating or failing to enforce regulations leads to more workplace injuries and health issues, which lead to lower productivity and increased medical care costs. Eliminating environmental regulations leads to contaminated ground, air, and water, which leads to health problems for workers and - eventually - huge cleanup costs. A corollary to this is the failure to enforce restrictions on monopolies, which invariably lead industries to bypass market pressures and set prices at whatever level they think they can get away with.

What all this means is that THERE ARE NO SIMPLE ANSWERS TO OUR PROBLEMS. Dem bones are still connected. The balloon bulges out at one end when you squeeze the other. Every action generates a reaction†. 

So ...

When you, as Taylor Swift encourages, do your research and decide for whom you're going to vote, don't vote for simplistic, no-pain, pie-in-the-sky promises. Vote for someone who at least has an understanding of how the world works, and how everything is connected to everything else.

Hint: it ain't Der Furor.

Have a good day. Check your voting registration to make sure it's accurate and up-to-date so that no one can challenge your right to cast a ballot. And be sure to do your research and think it all through before you cast that vote. You only get one, so use it wisely.

More thoughts coming.

Bilbo

P.S. - We haven't even mentioned the question of who will spend long hours of backbreaking labor under the hot sun to pick the fruits and vegetables if all those immigrants are rounded up and deported, and how much the cost of those fruits and vegetables will go up if the pickers have to be paid real wages and provided minimum benefits. Even if you can afford them, those red hats won't provide a lot of UV protection.

B.

* See "Project 2025."

** See "Der Furor," although he's just the worst example.

*** You still don't believe that "trickle-down economics" bullshit, do you?

† Newton's Third Law of Motion applies to economics and politics, too.

Economics for Dummies, The Election Edition

Earlier this month I wrote a post (Economics for Dummies) about the insanity of our current economic system. My main point was that most of the economic pain we are feeling at the moment has its roots in our embrace of a capitalist market economy in which short-term profits and shareholder return are more important than the affordability of goods and services to the consumer. Well, wouldn't you know that the related topics of economics and dummies have bubbled up in my fevered brain once again as they relate to yet another hot topic ... elections.

According to an analysis published last month by OpenSecrets.org, an independent and nonpartisan group which tracks money in political campaigns, spending on the 2022 midterm elections by all parties is likely to exceed 9.3 billion dollars. Yes, that's billion, with a "b." An NPR report on October 22nd indicated that "dark money" groups - which are not legally required to disclose their donors or sources of funding - have pumped nearly a billion dollars into GOP senate campaigns alone. 

Of course, dark money flows to the coffers of both parties, and the lack of transparency in the source and spending of these types of contributions makes it notoriously difficult to determine who - if anyone - benefits more in any given race.

Here's my outraged fulmination: the amount of money spent on American political campaigns is obscene.

Supreme Court decisions like Citizens United allowed vast amounts of unrestricted cash to pour into political campaigns, equating cash contributions with free speech protected under the First Amendment to the Constitution. You can buy a lot more free speech with 9.3 billion dollars than you can with the theoretical maximum allowed to the average middle-class American citizen wage earner. This is the chart published by the Federal Election Commission showing political contribution limits for 2021-2022:

You can read the entire discussion on allowable campaign contributions at the FEC website here. Where I come from, this is called a joke.

But let's leave aside the complete lack of limits and transparency on political contributions by organizations and look at another source of vast expenditures on elections: lawsuits.

Winning ... accumulating power for personal and political advantage ... is so important that enormous amounts are spent by individual office-seekers, political parties, and advocacy groups on lawsuits contesting electoral outcomes with which they disagree.

According to an investigative report by the Washington Post published in February, 2021, spending resulting from election-related lawsuits filed by Der Furor and his enablers has cost US Taxpayers at least $519 million dollars.

Can you imagine, Dear Readers, what could have been done with the 9.3 billion dollars spent on the 2022 midterm elections, and the hundreds of millions of dollars spent on frivolous lawsuits based on nothing?

The Merriam-Webster Online Dictionary defines obscene in part as, "repulsive by reason of crass disregard of moral or ethical principles; so excessive as to be offensive."

The money spent on winning elections at all costs, including lawsuits seeking to overturn elections that don't turn out as the loser wanted, is the very definition of obscene. Consider just a few of the moral implications:

How many schools could have have built, repaired, or resupplied, how many new teachers could have been hired, and how many current teachers could have received a pay raise?

How many hospitals could have been built, equipped, and staffed in underserved areas?

How many expensive medications could have been provided to the sick?

How many Americans could have been provided with affordable health care?

How many crumbling roads and bridges could have been repaired?

How many contaminated sources of drinking water could have been purified?

How about a just few of the ethical implications?

How many laws serve the interests of big business and the wealthy because they were written by lobbyists and passed by the votes of politicians beholden to big-spending donors?

How many visits to the public trough by big business and the wealthy been facilitated by office-holders to whom the receipt of campaign funds is more important than the public interest?

How many elected officials have done the bidding of wealthy donors in order to secure lucrative sinecures after they leave office?

Ladies and gentlemen, Dear Readers, the word of the day is obscene. Remember it when you go to the polls, and when you evaluate the performance of those to whom you have given your vote ... you deserve to know who they're actually working for.

Have a good day. Expect better, but don't count on it.

More thoughts coming.

Bilbo

Economics for Dummies

Last Monday I received an e-mail from our local trash and recycling contractor that reflects the reality of economics in the year 2022. Here's the key paragraph:

"Although we have done our best to keep our rates as low as possible, recent changes in disposal fees, rising costs of material, and increased service times are severely impacting our business. Reluctantly, we must pass on a portion of these rising costs in order to maintain the level of service that you expect and deserve from us. Customers should expect to see an increase of 10% per month on their upcoming billing."

This speaks clearly to a fundamental issue with our capitalist economic system: every business can raise its prices and blame it on increasing costs, but workers do not have the same option: their salaries stay low because it's the easiest cost for businesses to control to maintain profitability and shareholder return. I have to pay my trash contractor 10% more for what is, in effect, less service (this past summer, citing workforce issues, the contractor cut our weekly service from two trash and one recycling pickup to one of each). Granted, I’m still getting the same amount of trash hauled away in one pickup that used to be spread out between two, but the contractor has reduced their* operating costs while raising my rates with the excuse that their costs have gone up. Do you see the contradiction here? 

There's another aspect to this e-mail that is reflected in every other notification from every other business that is hiking its prices: couching the increase in terms of a benefit to the customer. The trash collector's email cites the need "to maintain the level of service that you expect and deserve;" a similar letter recently received from our pest control service says its very substantial price increase is necessary "in order to continue providing superior service." Neither one says anything about the benefit to the company of maintaining or increasing profitability or shareholder return.

A related issue that has received recent attention is the concept of “shrinkflation” - the reduction in size of or quantity of a product (most frequently packaged snack foods and beverages) without a concurrent reduction in its sale price, as a way to increase profit margins or, at least, hold them steady in the face of rising costs. Pay more, get less. Don't like it? Too bad.

Defenders of the capitalist market economy argue that it has provided a historically high standard of living and delivered steady and bountiful supplies of products and services, and this is true, as far as it goes. However, it has also been fed by the fuel of greed at the expense of the consumer in order to deliver ever-higher profits to businesses and returns to shareholders. Low-income families and those living on fixed incomes (such as yours truly) do not find the system especially advantageous when businesses report record profits** while simultaneously jacking up the prices they charge to customers who do not have the luxury of arbitrarily hiking their income. 

And I won't even mention rents which go up each year, lately often by double-digit percentages. 

Welcome to the world of the 21st Century market economy. Bring money. Lots of it.

Have a good day. More thoughts coming.

Bilbo

* I’m tempted at this point to go off on a tangent about the use of “their” as a singular collective pronoun, but that’s a rant for another day.

** The highest profit levels since the 1950s, by most estimates.

Economics as Religion

It has occurred to me that modern political economics is a lot like religion, for several reasons:

First, they both require you to take their laws and rules and pronouncements on faith, ignoring evidence to the contrary. Tax cuts will pay for themselves. Cutting taxes on the wealthy helps the poor. Deficits will disappear because the economy will continue to grow at very optimistic rates. Every other country will be happy to renegotiate trade agreements so that the United States will get a better deal at their expense.

Second, they both ask you to make sacrifices and accept pain in the present because the future will be paradise. You can see this as tariffs designed to protect certain industries result in pain for other segments of the economy ... the steel industry may be boosted a bit, but other industries are being hit hard by retaliatory tariffs, and the administration has had to come up with billions of dollars in aid to protect farmers.

Third, they both ask you to believe in miracles, such as Mexico is going to pay for that wall.

If you want to choose a miraculous system in which to believe, GOP economics and religion seem to be equally good options.

Have a good day. More thoughts coming.

Bilbo

For Whom the Toll Tolls, Revisited

You may recall that back on November 16th I wrote a post fulminating about the insane "dynamic" tolls imposed as a "traffic management" measure on Interstates 95, 395, and 495 here in Northern Virginia. That post featured a photo of the toll warning sign near my home showing a toll of $20.80 for a local trip of about 10 miles ...

Well, that was so last month.

On Monday of this week, Interstate 66 inside the DC beltway changed over to a toll road with dynamic tolls, and here's an interesting photo from the morning commute:

In case you're having trouble reading the sign, it shows a toll of $34.50 for a trip of about 10 miles on I-66. On Tuesday, the highest recorded toll on the stretch of road was nearly $40.00.

If you think this is actually a traffic management feature, let me make you an offer on a slightly-used bridge. 

The Virginia state government originally claimed the tolls would max out at $7 for the morning rush and $9 during the afternoon rush; however, after the huge tolls recorded on Monday and Tuesday, state transportation officials said those projections were based on an "average" trip, and not on trips taken at the heaviest of peak traffic times. 

Get used to being screwed like this in more and more areas as your government discovers it's running out of money because of ill-considered and unnecessary tax cuts and reliance on dogma rather than good sense and effective planning.

I'm surely glad I don't have a daily commute any more ... but I still end up getting stuck with these outrageous tolls occasionally.

Have a good day. Avoid driving on the Interstates in NoVa if you can ... if you can't, get that second mortgage approved before you set out.

Have a good day. More thoughts tomorrow, when we air our first collection of Great Moments in Editing and Signage for the month.

Bilbo

For Whom the Toll Tolls

The Northern Virginia (or NoVa) area where I live is famous for it's horrendous traffic. Every workday morning tens of thousands of cars snail their way from points as far south as Fredericksburg, as far west as West Virginia, as far north as Gettysburg, and as far east as Annapolis, inching their miserable way to commuters' jobs in Washington, DC and its close environs. In the evening, the process is reversed, with all those cars headed in the opposite direction, carrying their owners the long distances to the homes they can afford*. Oh, and let's not forget the noontime rush hour, too ... between 11 AM and 1 PM, there's often another highway mess as people try to run errands in their lunch breaks.

Many things have been done to try to address the traffic situation, and none of them have worked out very well ... we have a Metro rail system that is chronically underfunded, grossly overcrowded, and plagued with safety issues; buses that end up stuck in the same traffic as everybody else; and a small but expensive streetcar system that will probably never amount to anything.

And we have toll roads.

The toll roads are the successor to our "High-Occupancy Vehicle" (HOV) lanes; now they're called "High-Occupancy Toll" (HOT) lanes. This means that if you have the right number of people in your vehicle (at least two on one highway, and at least three on others), you can use the road for free; if you have the right transponder, however, you can use these lanes whenever they're open in the correct direction if you pay the toll.

There are, from my perspective, two problems with this arrangement.

First, the toll is variable, and depends on the prevailing traffic conditions. If traffic on the main highway is light, the toll is small; as the traffic density increases, the tolls go up sharply, supposedly to help manage the flow of traffic by keeping the number of cars on the express lanes down. At the place this photo was taken on Interstate 95, not far from my home, the toll to the Prince William Parkway exit - a distance of about ten miles - is $20.80. At less-congested times, it can be $2.00 or less. On one occasion this past year, I had to suck up a toll of $13.65 in order to get Agnes to a medical appointment on time in Tyson's Corner ... a distance of 18 miles. For purposes of comparison, the toll for the 86-mile distance we travel on the Pennsylvania Turnpike** when we go to Pittsburgh is $12.10.

Second, the toll roads were constructed and are operated under a public-private partnership with Australian company Transurban. This means that the private operator that built and operates the roads takes a hefty chunk of the toll income, as well as interest and fees charged on motorists who don't pay the tolls***. Such partnerships are becoming more common as cash-strapped municipalities look for new ways to finance transportation infrastructure maintenance and improvements, but it appears to me that the ability of a commercial firm to levy and collect tolls and impose fines and penalties is ripe for abuse^†.

But that's just me, and it pisses me off to spend outrageous amounts of money on tolls when most of it goes to a company in Australia.

Have a good day. Ask not for whom the toll tolls ... it tolls for thee^††.

See you tomorrow for the announcement of the Left Cheek Ass Clown for November. More thoughts then.

Bilbo

* Around here, a miserable commute is the trade you make for a home you can afford.

** Between Breezewood and New Stanton ... not a stretch of road I recommend if you can help it.

*** It's been the subject of lawsuits.

† Of course, in the business-friendly Trump Era, that's hardly a problem.

†† With apologies to John Donne.

A Personal Anecdote About Credit Reporting Agencies

We live in a society that runs on credit. You can't buy a car, a house, furniture, electronics, or pretty much anything expensive unless you can pass a credit check that indicates you're not a deadbeat. A good credit score is a requirement of modern life*, opening all sorts of doors and greasing the financial skids in a society where paying cash for large purchases can arouse the interest of the police and the local DEA office*.

And how does one get a good credit score? Well, of course, by paying ones bills on time, not having a criminal record, and so on. But where does that score come from? Who gives it to you?

There are three major credit reporting agencies: Equifax, TransUnion, and Experian, who hoover up all the available information about you, your income, your shopping and payment history, whether you own or rent your home, and pretty much everything else. Using their own proprietary systems, they crunch all those numbers down into a score that tells merchants and service providers whether or not it's safe to bet on your ability to pay for the things you buy.

The problems with this system are manifold, and many of them are coming to light. Equifax, for instance, is in deep kimchi with the government** over the lack of security of their databases, which have been repeatedly plundered by crooks looking to steal the financial and personal information we're required to provide to fuel the credit reporting system. And all of the credit reporting agencies maintain that they - not you - own all the information they hold about you and your life, and can sell it to anyone they choose like any other commodity.

But what if the information they have about you is wrong?

In theory, you can petition the credit reporting agencies to correct erroneous information they have in your record ... in practice, though, getting something changed is neither easy nor are results guaranteed. Here's a personal example ...

One day in the late 1970s, I was reviewing my credit history when I noticed something odd: a Gulf Oil Company credit card I was sure I didn't own. I had applied for and received credit cards from two other gas companies, but I had never gotten one from Gulf. I contacted the credit reporting agency to ask about it, and they said they would remove it from the record if I could prove it wasn't mine. How do I prove a negative, I wanted to know. We'll let you know when we're satisfied, they answered.

Well, I did some digging and made some phone calls and finally figured out what the problem was: there was indeed a Gulf Oil credit card issued - to my father, who has the same name as I, but not the same middle initial. The number on his card matched the number of the card shown on my credit report.

Problem solved, you'd think. Not so.

I notified the credit reporting agency in writing, explaining the error and pointing out that the card in question also showed up on my father's credit report. The agency, however, did not accept my explanation. So my father wrote a letter, too. The agency still maintained the record was accurate and refused to change it.

We went back and forth for nearly a year and I finally gave up. Since I was young and in the first decade of establishing my own credit history, my father's credit was better than my own, and he always paid off that card every month, I figured the heck with it. The Gulf card finally disappeared from my credit history sometime in the mid-1990s.

I tell you this story because I don't trust any of the credit reporting agencies, and neither should you. I realize that they are a necessary evil in a society based on credit, but they lack adult supervision, take no responsibility for the accuracy of the data they hold, and make a lot of money selling the information we we have no choice but to provide them.

Quite a racket, no?

Have a good day. Watch your credit report carefully ... the credit reporting agencies won't.

More thoughts tomorrow.

Bilbo

* I remember an ad for a credit card - I think it was BankAmericard (now Visa) back in the days when credit cards were a relatively new thing ... the ad noted how convenient it was to "pay with your good name," as if that were as good as cash on the barrelhead.

** Not to worry, though, with the current administration in power, I'm sure they'll come out all right.

Labor Day

If you have the day off, enjoy it and be safe! If you don't, I suppose you should be glad you have a job. 

If you have a job, I hope you are doing it better than most members of Congress are doing theirs ... chances are that if they had real jobs, they'd have been fired long ago.

Have a good day. More thoughts tomorrow.

Bilbo

New Discount Strategy

Last week, Angel wrote about a Chinese amusement park that offered a discount on its admission fee for women over 18 who wore miniskirts. This concept could be considered discriminatory, as there was no equivalent discount for men over 18 who wore miniskirts; on reflection, however, the image of most men in miniskirts would argue against the visuals, if not the fairness, of such discounts.

This leads me to a consideration of the use of various types of discounts to encourage economic activity.

As an officially acknowledged old geezer, I'm getting used to the idea of the senior discount, which is widely offered in restaurants and theaters to those of us living on fixed incomes. Various businesses also offer minor discounts for "paperless billing," in which one agrees to receive bills by e-mail (it supposedly saves the business money on postage), or offer a discount for those who agree to pay their bills by a direct debit* of their bank account.

And, of course, there are the standard "happy hour" discounts at bars, in which the discount is based on the time of the customer's visit; an additional discount is sometimes offered for unescorted ladies, to encourage a higher female-to-male customer ratio.

But let's get back to Chinese discount philosophies for a moment ...

I call your attention to this article from the BBC earlier this week: Chinese Restaurant Offers Bra Size Discounts.

Yes, Dear Readers, the Trendy Shrimp restaurant in Hangzhou offers female customers discounts based on their bra cup size ...

The advertisements for this discount first appeared on August 1st, but have apparently since been removed because of complaints from some local people. The restaurant's manager, Lan Shenggang, defended the discounts, however, stating that, "Once the promotion started, customer numbers rose by about 20%." He also noted that "some of the girls we met were very proud - they had nothing to hide."

When your cup runneth over, it really runneth over ... at least at the Trendy Shrimp restaurant.

Have a good day, and come back tomorrow for the naming of our Right-Cheek Ass Clown for August. More thoughts then.

Bilbo

* I don't trust this at all. I pay many bills online, but in a way that allows me to schedule the dates and amounts of the payments ... nobody gets the right to reach into my account and pull money out on their own.

About Foxconn and Tax Credits

I have often written about taxes in this space, as you know if you've been with me for any length of time. My position on taxes is this: I don't like to pay them any more than anyone else does, but I recognize that if I expect my government to provide services I need or want, I need to pay my share of the cost. As the American jurist Oliver Wendell Holmes, Jr, famously said, "Taxes are the price we pay for a civilized society*."

Unfortunately, taxes in this country have strayed far from their original purpose of providing funds to operate the government and provide basic services. Over the years, they have morphed into a tool for tinkering with the economy, for rewarding political supporters** or penalizing enemies, and for supporting experiments in social engineering. "Tax credits" are the go-to solution for every program a government wants to appear to support, but doesn't want to have to pay for directly.

I thought about this last week when I saw this headline in the Washington Post business section: Foxconn Deal to Build Massive Factory in Wisconsin Could Cost the State $230,700 per Worker. The story details how Foxconn, the huge technology firm that provides parts and supplies to Apple, Google, and many other companies, has agreed to build a giant factory in Wisconsin which would employ 3,000 people by 2020, with potential growth to 13,000. If the factory is built (which is by no means certain***), and if it does eventually employ 13,000 people, an economic analysis suggests that the tax breaks granted to entice Foxconn to build the plant will cost the state of Wisconsin about $230,000 per worker in lost tax revenue.

Which goes to the question I always ask when "tax credits" are touted as the solution to a problem: how will the lost revenue be made up?

The stock answer is that tax credits pay for themselves, because the losses will be made up by increased taxes on on individual earnings and on other businesses which benefit from the economic boom generated by the original tax breaks. This reminds me of the old joke that compared daylight savings time to the man who cut off the lower half of his blanket and sewed it to the top to make it longer.

As I see it, tax credits are a false solution to economic problems. Allowing individuals and businesses to reduce their tax liability, even for ostensibly good reasons, reduces the amount of money taken in by the government for use in funding its programs and operations, and that shortfall needs to be made up somehow ... usually by higher taxes on somebody else.

Americans don't like taxes, but the historical truth is that we're not so much anti-tax as we are anti-taxation without representation^†. We elect (or vote out) a President, members of Congress, governors, state legislators, mayors, and other local officials who we make responsible for decisions - with our input - on the imposition of taxes. Today, of course there's a joke that says "If you thought taxation without representation was bad, you should see it with representation." Nevertheless, although we complain bitterly about high taxes, we here in the US enjoy one of the lower overall tax burdens in the world.

So ...

If you're a resident of Wisconsin, and you're looking forward to one of those jobs at Foxconn making flat-panel displays, you should understand that you will very likely pay higher taxes on your paycheck and higher fees for other services to compensate the state for the huge tax breaks your employer is getting for giving you that job in the first place. Good luck with that.

Have a good day ... one that isn't, hopefully, too taxing.

More thoughts tomorrow.

Bilbo

* Or Donald Trump's version of America, which increasingly doesn't seem to qualify as "civilized."

** "A government that robs Peter to pay Paul can always count on the support of Paul." - George Bernard Shaw

*** According to the article, Foxconn announced plans to build a new $30 million plant in Pennsylvania four years ago, but the factory was never built.

† The Declaration of Independence castigated King George III "For imposing Taxes on us without our Consent," not for "imposing Taxes on us."

The Pottery Barn Rule of Financial Disclosure

It must be nice to be so rich that you have to amend your federal financial disclosure forms 77 times because you've forgotten a few million dollars or the odd piece of real estate here and there. Consider this quote from a recent opinion article by Katherine Rampell in the Washington Post:

"[Jared] Kushner, like many of President Trump’s senior officials, is really rich. And really rich people, almost by definition, have a lot of assets to keep track of."

In the article, Ms Rampell acknowledges that when one is as staggeringly wealthy as various members of the Trump family, it's understandable that they might from time to time lose track of some of their vast assets. This is, of course, a problem not often faced by average Americans about to lose their health care or job or both.

Understandable or not, the omission of assets on the financial disclosure forms government officials are required to file, and the ability to declare those omitted assets after the fact without penalty, has an odd smell to it*. Ms Rampell suggests that such errors in financial disclosure filing might be significantly reduced if the federal government applied a variant of the Pottery Barn Rule ("You break it, you bought it") - taking a page from the Justice Department's zeal for civil asset forfeiture**, she suggests that assets in excess of a certain value (she suggests $1 million) which are “forgotten” in official federal disclosures can be seized by the government. The theory is that if those assets were so inconsequential as to be overlooked, the individual is wealthy enough to not really need them, and should be able to donate them to the ever-cash-strapped government.

I really like this idea.

The last time I had to update my security clearance, I dutifully filled out the incredibly long and complex online e-QIP*** forms that asked for documentation of every aspect of my life, places of residence, job history, finances, acquaintances^†, encounters with the law, etc, and which provided dire warnings about the penalties for providing false or inaccurate information. And then, a few months later, I had to sit down in an interview with a professional investigator, go over every line, and explain in detail every inconsistency or error (such as any differences between that submission and the previous one I'd filed five years before). I'm still amazed that anyone manages to get a security clearance^††.

Considering that most of us run the risk of huge fines, interest, penalties, and even jail when we make the smallest of mistakes on our e-QIPs or our tax returns, it seems somehow unfair that the enormously wealthy should be able to get away with the equivalent of an "oops, my bad" when caught in an error involving millions of dollars.

Bring on the Pottery Barn Rule!

Have a good day. Declare accurately. See you back here again tomorrow, when we name the Left-Cheek Ass Clown for July.

More thoughts then.

Bilbo

* Unless you are one of those who is firmly convinced that Mr Trump's fecal material doesn't stink.

** The seizure of private property by law enforcement agencies before the owner has been proven guilty of a crime ... often before the owner has even been charged with a crime.

*** Electronic Questionnaire for Investigations Processing.

† And, trust me, I have a lot of questionable acquaintances.

†† Unless, of course, they're related to Donald Trump and nepotized into nice White House jobs.

Bilbo's Thoughts on Economic Policy

Yesterday in this space I wrote about some of my thoughts on tax reform, admitting at the end that I know next to nothing about economics. My knowledge of economic theory is limited to one simple fact: if I don't pay my bills, I will end up without food, water, or a place to live.

My meager understanding of economic theory is that it lies at the intersection of greed and herd psychology. You don’t need an MBA from Harvard Business School or a PhD in Economics from Yale to know that the economy is in trouble. I have a BA in Linguistics and an MS in International Relations, and even I can recognize that the economy is slowly clawing its way out of the toilet, largely to the benefit of the higher income classes. Why is this? While I’m untutored in the Mystical and Arcane Rites of the Holy Mysteries of Economic Policy, I nevertheless perceive a few things that ought to be obvious, and since lack of knowledge has never stopped any good blogger before, with a ruffle of drums and a blare of trumpets, here are my observations on national economic policy:

1. Spending More Than You Earn Is Bad. If you and I engage in reckless deficit spending, we go to jail. If the government does it, reinforced platoons of dry-as-dust economists with PhD’s, bow ties, and leather elbow patches will be marshaled to explain why it’s a good thing. Whether you’re a Tax-and-Spend Democrat or a Don’t-Tax-but-Spend-Anyhow Republican, balanced budgets are smart. You and I need to pay taxes and the government needs to spend responsibly. Unfortunately, only you and I are held to our part of the bargain.

1a. We Desperately Need a Rational Tax System. See yesterday's post.

1b. And Some Adults in Congress Willing to Consider Responsible Spending*.

2. Unrestricted Capitalism Is As Bad As Blind Communism. John Kenneth Galbraith once said that under capitalism, man exploits man, while under communism the exact opposite is true. A purely capitalistic society focused on the generation of wealth tends to protect the business community and upper classes at the expense of the middle and lower classes. A purely communistic society removes the incentive to work hard by removing its rewards. Sound economic policy lies somewhere between the two, and requires a free-market economy governed by rational regulations to prevent the sort of excesses with which we are now all too familiar.

3. Quarterly Earnings Reports Are Stupid. One of the biggest faults of US markets is that we lack a long-term perspective. Businesses driven by the need to show profits each quarter will focus only on short-term gain at the expense of long-term growth and health. The solution: eliminate quarterly reporting of all economic statistics and replace it with annual reporting. This will help focus on long-term economic health rather than short-term profit, and minimize the whipsawing of the markets in reaction to short-term problems.

4. “Too Big to Fail” Equals “Too Dangerous to Survive.” When a Fannie Mae, Freddie Mac, Lehman, or Bear Sterns has grown so large that it’s failure can drag down large portions of the economy, something is wrong. Bigger is not necessarily better. The government must exercise some prudent judgment in determining how large a financial institution can grow before it becomes too much of a threat to the rest of the economy. Huge financial institutions are too big to fail, but you and I are too small to matter. Fired CEOs get huge golden parachutes, but you and I will get cents back on the dollar - if that - when our investments tank.

5. Bring Back the Concept of “Moral Hazard.” In economic terms, “moral hazard” refers to the responsibility borne by economic decision makers for their performance, judgment, and prudent risk-taking. It implies that those who make the huge salaries should also bear the risk of punishment if their performance is poor. In practical terms, moral hazard is dead. The CEOs of Fannie Mae and Freddie Mac were fired, but each will walk away from the wreckage with millions of dollars in severance payments. Real People who exercise judgment that bad go to jail.

6. Publish the Full Details of Every Congressional Budget Deal in The Congressional Record, Along With the Names of the Sponsors. The Common American Taxpayer (Americanus Emptypocketus Ignoramus) has a right to know how the money he pays in taxes is being spent. Perhaps shedding a little light on the process will help bring it under control. Yeah, good luck with this one, too.

Remember that it was George Bernard Shaw who famously said that, "A government that robs Peter to pay Paul can always depend upon the support of Paul."

And Paul's doing a lot better than you and I.

Have a good day. More thoughts tomorrow.

Bilbo

* "Responsible Spending" is not created by petulant squabbling that results in endless Continuing Resolutions rather than a coherent federal budget.