Archive for the ‘Regulation’ Category.

Your Good Intentions Mean Virtually Nothing

I am exhausted with folks, particularly on the Progressive Left, judging themselves and each other based on their intentions.  Your intentions mean virtually nothing.  I suppose it is better to have good intentions than bad, but beyond that results, particularly in the public policy arena, are what should matter.  And the results of most Progressive well-intentioned legislation are generally terrible.  For example, as I wrote earlier today, poverty in this country is mainly caused by lack of work rather than low wage hours, but Progressives preen over their good intentions in introducing higher and higher minimum wages that will only serve to reduce the work hours of low-skilled poor people.

Via Mark Perry comes this great article on Progressive good intentions in Seattle collapsing into rubble.  It does not except well, so I recommend you check it out, but I will summarize it.

Begin with a libertarian goal that should be agreeable to most Progressives -- people should be able to live the way they wish.  Add a classic Progressive goal -- we need more low income housing.  Throw in a favored Progressive lifestyle -- we want to live in high density urban settings without owning a car.

From this is born the great idea of micro-housing, or one room apartments averaging less than 150 square feet.  For young folks, they are nicer versions of the dorms they just left at college, with their own bathroom and kitchenette.

Ahh, but then throw in a number of other concerns of the Progressive Left, as administered by a city government in Seattle dominated by the Progressive Left.  We don't want these poor people exploited!  So we need to set minimum standards for the size and amenities of apartments.  We need to make sure they are safe!  So they must go through extensive design reviews.  We need to respect the community!  So existing residents are given the ability to comment or even veto projects.  We can't trust these evil corporations building these things on their own!  So all new construction is subject to planning and zoning.  But we still need to keep rents low!  So maximum rents are set at a number below what can be obtained, particularly given all these other new rules.

As a result, new micro-housing development has come to a halt.  A Progressive lifestyle achieving Progressive goals is killed by Progressive regulatory concerns and fears of exploitation.  How about those good intentions, where did they get you?

The moral of this story comes back to the very first item I listed, that people should be able to live the way they wish.  Progressives feel like they believe this, but in practice they don't.  They don't trust individuals to make decisions for themselves, because their core philosophy is dominated by the concept of exploitation of the powerless by the powerful, which in a free society means that they view individuals as idiotic, weak-willed suckers who are easily led to their own doom by the first clever corporation that comes along.

Postscript:  Here is a general lesson for on housing affordability:  If you give existing homeowners and residents the right (through the political process, through zoning, through community standards) to control how other people use their property, they are always, always, always going to oppose those other people doing anything new with that property.  If you destroy property rights in favor of some sort of quasi-communal ownership, as is in the case in San Francisco, you don't get some beautiful utopia -- you get stasis.  You don't get progressive experimentation, you get absolute conservatism (little c).  You get the world frozen in stone, except for prices that continue to rise as no new housing is built.  Which interestingly, is a theme of one of my first posts over a decade ago when I wrote that Progressives Don't Like Capitalism Because They Are Too Conservative.

Postscript #2:  So, following the logic above, one can think of building restrictions and zoning as a form of cronyism.  Classic cronyism is providing subsidies to politically favored companies and restricting the ability of new competitors to arise to compete with them, granting them an effective monopoly and the ability to jack up their prices.  So what do we do with housing?  We give massive subsidies to home-owners and restrict competition from new housing that might reduce their home value, thus granting current homeowners an effective monopoly and the ability to jack up their prices.  I challenge anyone to tell me that rising home prices in Palo Alto are not driven by the exact same government actions for favored constituents as are rising prices for Epipens.

Postscript #3:  I will ask a question using Progressive terminology -- you were worried about these young renters and their power imbalance vs. development companies and landlords.  So how much more powerful are they now with a thousand fewer rental units on the market?  Consumers have power when supply is plentiful.  Anything done to reduce supply is going to reduce consumer power.

Will Aspirin Become the Next Epipen?

Aspirin is grandfathered from all the FDA silliness, right?  That's what I thought until this:

But if the FDA gets its way, nitroglycerin will not be obtainable for pennies. The situation was stable until Pfizer went through the time and expense required to test its particular version of nitroglycerin, Nitrostat, which the FDA approved in 2000. Once the FDA did that, other versions became officially "unapproved." In 2010, the FDA sent warning letters to two companies, Glenmark and Konec, ordering them to cease marketing their versions of nitroglycerin, known as sublingual nitroglycerin tablets, leading to the New York Times headline above. The article quotes Dr. Harry M. Lever, a cardiologist at the Cleveland Clinic, who said, "If it's not approved and no one has tested it, we can't be sure that it's safe and effective." He added that if patients with angina took substandard or ineffective nitroglycerin tablets, their pain might not subside and the problem could potentially progress to a heart attack.

His statement is false. The unapproved versions have been tested in three important ways: the companies that manufacture these drugs thoroughly vet them to make sure that they are pure and offer a consistent dose of nitroglycerin; these marketed drugs have been tested in the bodies of millions of Americans in regular medical practice over many years; and many different organizations have tested nitroglycerin in countless clinical trials.

I can't think of anything about the situation in nitroglycerin that doesn't obtain for aspirin.  By this, all it would take would be for one company to have the cojones and cash to get FDA approval for their aspirin and they might be able to wield a monopoly.

Perfect Example of Blaming the Free Market for Government Interventions

Hillary Clinton, along with many politicians and most of the media, is arguing that the recent large price increase in Epipens is some sort of market failure requiring government intervention to solve.

Democratic presidential nominee Hillary Clinton jumped into the fray over rapid price increases for the EpiPen, a life-saving injection for people who are having severe allergic reactions.

Mrs. Clinton called the recent price hikes of the EpiPen “outrageous, and just the latest example of a company taking advantage of its consumers.”

In a written statement calling for Mylan to scale back EpiPen prices, Clinton added, “It’s wrong when drug companies put profits ahead of patients, raising prices without justifying the value behind them.”

Why aren't similar government interventions required to curb greed in the pricing of paint, or tacos, or toilet paper?  Because the markets are allowed to operate and competitors know that if they raise prices too high, their existing competitors will take sales from them, and new competitors may enter the market.  The reason this is not happening with Epipens is that the Federal government blocks other companies from competing with Mylan for the Epipen business with a tortuous and expensive and pointless regulatory process (perhaps given even more teeth because Mylan's CEO has a lot of political pull).  The MSNBC article fails to even mention why Mylan has no competition, and in fact essentially assumes that Epipens are a natural monopoly and should be treated as such, despite the fact that there are 3 or 4 different companies that have tried (and failed) to clear the regulatory process over the last several years with competing products.  Perhaps these other companies would have been smarter to appoint a Senator's daughter to a senior management position.

Hillary Clinton is proposing a dumb government intervention to try to fix some of the symptoms of a previous dumb government intervention.  It would be far better to work the root cause instead.

Postscript:  Credit Vox with the stupid argument of the day:  

Other countries do this for drugs and medical care – but not other products, like phones or cars – because of something fundamentally unique about medication: If consumers can’t afford the product, they could have worse odds of living. In some cases, they face quite certain odds of dying. So most governments have decided that keeping these products affordable is a good reason to introduce more government regulation.

Hmm, let me pick a slightly different example -- food.  I will substitute that into the Vox comment.   I think it would be perfectly correct to say that there is not price regulation of food in the US, and that "If consumers can’t afford [food], they could have worse odds of living. In some cases, they face quite certain odds of dying."  In fact, the best place today to face high odds of dying due to lack of food is Venezuela, where the government heavily regulates food prices in the way Vox wished to regulate drugs prices.

Stupid Regulatory Games

The US Government has various rules on insurance companies that include a notification requirement if they are not going to renew a policy.  However, apparently this requirement is for a date earlier than most insurance companies have made their annual underwriting decisions (in my case often because I have not gotten them all the information they need).  So every year, like clockwork, I get notices on all my business insurance policies that they are not going to renew, and then like clockwork they (mostly) all renew.  Insurance companies comply by sending, it appears, everyone a non-renewal notice.  That way, they can't get in trouble for not informing you in time on the off-chance it actually does not renew.  So in practice, the regulatory requirement is both expensive and worthless.

Actually, it is worse than worthless, as the two times I was non-renewed for a policy it was impossible to differentiate their actual warnings that I might have an underwriting problem from these pro forma ones.  By forcing insurance companies to cry "wolf" constantly, I missed the real dangers.

A Reliable Marker of Socialism: Politicians Accusing Private Individuals of "Hoarding"

When socialists destroy markets, shortages inevitably follow.  The current situation in Venezuela is a great example, where just about everything from food to toilet paper has disappeared off store shelves.   Rather than take a step back and say, "Wow, our policies sure have created a mess," socialists inevitably blame the shortages they created on private individuals.  Nothing says "I am a socialist" like a politician denouncing their citizens for hording.

Here is today's example from the state of New York.  New York has totally screwed up its real estate markets by making it nearly impossible to build new housing and putting rent controls on the housing that exists.  Which has inevitably led to shortages.  Which is of course blamed by politicians on individuals who are "hoarding"

State Assemblywoman Linda Rosenthal, one of the [anti Airbnb] bill's sponsors, disagrees, claiming that it targets "people or companies with multiple listings. There are so many units held by commercial operators, not individual tenants. They are bad actors who horde multiple units, driving up the cost of housing around them and across the city."

Government vs. Government, Gender War Edition

A while back I joked that the SJW's should stop the recent proposed rules to greatly expand corporate race and gender reporting (the current EEO-1 report) because the Feds only provide two categories (male and female) for gender.

As it turns out, this might actually be a real problem in New York

The NYCHRL [New York City Human Rights Law] requires employers[, landlords, and all businesses and professionals] to use an [employee’s, tenant’s, customer’s, or client’s] preferred name, pronoun and title (e.g., Ms./Mrs.) regardless of the individual’s sex assigned at birth, anatomy, gender, medical history, appearance, or the sex indicated on the individual’s identification.

Most individuals and many transgender people use female or male pronouns and titles. Some transgender and gender non-conforming people prefer to use pronouns other than he/him/his or she/her/hers, such as they/them/theirs or ze/hir. [Footnote: Ze and hir are popular gender-free pronouns preferred by some transgender and/or gender non-conforming individuals.] …

Examples of Violations

a. Intentional or repeated refusal to use an individual’s preferred name, pronoun or title. For example, repeatedly calling a transgender woman “him” or “Mr.” after she has made clear which pronouns and title she uses …

So the Feds require me to categorize an employee as a male or female but New York makes it illegal to do so if the employee does not want to be in one of those categories.   Hmmm.

 

Minimum Wage Pits Employees vs. Customers, Not Employees vs. Management

This post earlier on the customer service downsides of the new salaried overtime rules got me thinking more broadly about the impact of minimum wage type laws.  Progressives justify such laws by saying that there is a power imbalance between management and employees, and that the government needs to have minimum wage laws to make up for the fact that employees lack power.

But from my experience in the service world, it is wrong to look at the situation as a power struggle between managers and employees.  It is much more correct to look at this as a power struggle between employees and customers.  Let me explain.

Service and retail firms tend to live on razor-thin margins.  Retailers typically live on single-digit profit margins, and those of companies like Wal-Mart are as low as 2% of revenues.  Our company in the service business has a similar experience, averaging profit margins of 3-5% of revenues over the last 10 years.

This is not an accident.  Most service and retail businesses depend on simple service-delivery models using relatively low-skilled workers.  There are many low-skilled workers in the world.  If a company were to start making huge profits with a service model using such workers, it would be easy for others to copy it and hire the same types of workers and undercut them on price.  Margins tend to get competed down to the bare minimum.

No matter how much progressives would like it to be so, when California raises its minimum wage, it probably is not going to come out of company margins, at least in the near term.  Over the 10 years from about 2013 to 2022, California will have raised its minimum wage over 87% from $8 an hour to $15.  Wages and costs like workers comp premiums that are tied to wages are about half my costs.  This means an 87% labor cost increase will increase my total costs 44%.  How is that going to come out of a 4% margin?  It is not.

There are really only two things we can do, individually or in combination.  First, we can raise prices 44%, just to try to stay even.  Of course, some customers will balk and stop buying, and then we will lose business and perhaps have to close (we have already closed over half our businesses in California for just this reason).  Or second, we could cut staff in half to keep wages under control.  Of course, this means customers get served much more poorly, which also may drive customers away.  Other companies like fast food restaurants have a third option of automation, replacing people with machines -- I wish we could do this but right now we have run out of ideas for automating bathroom cleaning and landscape work.

Hopefully, you can see what is going on here.  The real tension here is between employees and customers.  When the state mandates a minimum wage in low margin service businesses (such laws are largely irrelevant to high-margin technology companies and such), compliance is paid for by the customer, either in the form of higher prices or worse service or both.

The Customer Service Downside to the New Federal Overtime Rules

I and others have written a number of times about the many downsides to new Federal rules that will force most junior salaried managers to start punching a timeclock.

I run a service business and these rules affect us substantially.  Like many retail operations, we have hourly employees who work for a local manager who is salaried and generally earns less than the new $47,476 annual cutoff.   We are not entirely sure how we are going to comply, but in the near-term compliance will likely involve a combination of hard hour limits for managers, some devolution of manager tasks to minimum wage workers, and price increases to customers.  In the long-term, we may have to consolidate manager positions.

But there is one additional change that is almost certainly going to occur -- a reduction in customer service.  To understand why that is, you need to understand the retail and services world.

In the service world, sh*t happens.  The ice machine suddenly breaks.  An important worker just does not show up.  A customer complains that no one is cleaning the bathroom.  Because of razor thin margins, service work loads are carefully scheduled.  There simply is not a lot of slack.  So when something unusual happens, it is usually the local manager who takes up the slack.  They fix the problem, somehow, even if it means they have to clean the bathroom themselves.  Not one of my managers has bathroom cleaning as part of their duties, but every single one of them likely cleans bathrooms every month, because they are covering the performance gaps left by other employees.

When managers are subject to overtime, this changes.  We only get 40 hours a week of that person's time (at least at a reasonable rate) and so every hour must count.  Every hour must suddenly be carefully husbanded and spent only on value-added tasks, like balancing the register and merchandising the shelves.  We can't waste them on the manager covering for employee shortcomings.

So who will clean the bathroom when the employee assigned to do so fails?  Who will cover the second register when an employee just does not show up for work?  Who will expedite the ice machine replacement so customers don't have to go long without ice?  I don't know.  Maybe nobody.  Or at least nobody as long as prices charged to customers aren't raised substantially.

Postscript:  If you are not in retail or a service business, you may read this and say, "well, if you hired better workers, they would be more reliable and you wouldn't have to cover for them."  I have two responses.  First, only someone who never worked retail could say that.  People are individuals and have their own needs and lives, and those sometimes conflict with getting the job done, no matter how well we screen.

Second, let me tell a story from this last weekend when I was at the graduation ceremony for Amherst College.  Amherst could reasonably be considered among the 10 most selective schools in the nation.   It is consistently ranked as the #1 or #2 small liberal arts college in the nation.  This weekend they selected an outstanding student from this outstanding bunch to make a presentation at graduation.  In it, she told a story of never, ever being able to get to a certain class, that is held at 12:30 in the afternoon, on time.  She said she was late every single time.   This is supposedly one of the elite young people in the country who would never even consider accepting a "menial" service job with my company, but never-the-less can't get to a class on time.

Why Don't Progressives Use Their Power as Hedge Fund Customers to Challenge Hedge Fund Compensation?

Kevin Drum observes that the top 25 hedge fund managers earned $13 billion in total, including one hapless dude who made $250 million despite losing money and shutting down the fund.

I will say that I have always scratched my head over asset manager compensation.  The tradition is that they get paid as a percentage of assets managed, sometimes with a percentage of the profits as well but never taking a percentage of the losses.   Perhaps this made some sense with smaller pools of money, but today with huge pools of money, the same old percentages yield ludicrous compensation results.  I certainly understand why the managers would defend this compensation scheme, but why do customers accept it?

This reminds me of real estate broker compensation.  The tradition when I grew up is that the seller paid 6%, about half of which went to the seller's broker and half to the buyer's broker.  For years that 6% was etched in stone and no one broke ranks -- the agents were pretty good at maintaining the cartel, and the government helped by putting the force of law behind broker licensing that helped keep the agent supply down.  But as home prices kept increasing, people started noticing that while 6% of $100,000 may have made some sense as reasonable compensation, 6% of $2 million was absurd, especially since a $2 million home was not even close to 20x harder to sell.   So people, initially savvy high net worth folks, and later everyone, began negotiating the 6%.  I have negotiated this number on every home I have sold since the mid-1990s.

I am not really knowledgeable about the asset management business -- in some sense I have negotiated my commission by choosing to put all my money in low-fee Vanguard funds.  How does the asset management business hold the line on fees, particularly when they are in a business where it is so easy to measure their relative performance, and presumably pay them based on this performance?

Which got me to thinking about the customers of hedge funds.  Aren't many of these customers progressive or controlled by progressives?  Hedge funds have been very successful marketing to university endowments, non-profit foundations, and public pension funds -- aren't these institutions often controlled by progressives, or at least left-liberals?  Aren't a disproportionate share of the very high net worth Hollywood and billionaire types who invest in hedge funds also progressive or liberal?  Heck, Hillary Clinton's son-in-law ran a hedge fund until recently.  So why don't these folks get together and instead of worrying about whether their portfolios are invested in Israel or Exxon or some other progressive bette noir, why don't they agree to a set of principles as to how they are going to pay for their asset management services in the future, and stick to these?  I say that progressives should get together, because they are politically passionate about this, but I can't think of any good reason why good libertarians or conservatives wouldn't happily join in to reduce their fees.

I understand that to the extent that there are black swan hedge funds that beat the market year in and year out, these folks will be hard to challenge as they can probably write their own terms.  But for the other 99% of hedge funds, why not use the power progressives already have as customers before we start talking about various government hammers.

PS-  I will put my two cents in.  I think the new Mother Jones site design is awful.

So @tylercowen, You Want to Understand the Great Stagnation? Here It Is

Certainly the government's current permission-based approach to business regulation combined with an overt hostility of government (or at least those parties that influence it) to radically new business models (see: Uber) is a big part of the great stagnation story.

But insanity like this is also a big part:

Vague but expensive-if-not-correct rules on employee seating just got vaguer and harder to figure out

Weighing in on two California laws that require employers to provide suitable seating to workers when “the nature of the work” permits it, the California Supreme Court said the phrase refers to an employee's tasks performed at a given location for which the right to a suitable seat is asserted.

In response to questions certified by the U.S. Court of Appeals for the Ninth Circuit, the state high court said April 4 that the phrase “nature of the work” doesn't require a holistic evaluation of the full range of an employee's tasks completed during a shift.

An employer's business judgment and the layout of the workplace are relevant in determining whether sitting is permitted, but courts should apply an objective analysis based on the totality of the circumstances, the California Supreme Court said.

It held that “if an employer argues there is no suitable seat available, the burden is on the employer to prove unavailability.”

As a business owner in California, I am going to have to do a ton of research to figure out just how we can comply with all this, and even then I will likely be wrong because whether one is in compliance or not is never actually clear until it is tested in court.  I had to do the same thing with California meal break law (multiple times), California heat stress law, new California harassment rules, California sick leave rules, the California minimum wage, Obamacare rules, Obamacare reporting, the new upcoming DOL rules on salaried employees, etc.

Five or ten years ago, I spent most of my free time thinking about improving and growing the business.  Now, all my mental bandwidth is consumed by regulatory compliance.  I have not added a new business operation for years, but instead have spent most of my time exiting businesses in California.  Perhaps more important is what I am doing with my managers.  My managers are not Harvard MBAs, they are front-line blue collar folks who have been promoted to manager because they have proven themselves adept at our service process.  There are only a finite number of things I can teach them and new initiatives I can give them in a year.  And instead of using this limited bandwidth to teach some of the vital productivity enhancement tools we should be adopting, I spend all my training time on compliance management issues.

Thank God We Don't Have Cable Neutrality

Time Warner Cable, the owners of the Dodgers local broadcast rights is continuing to battle with local cable channels to be added to their cable package.  Like last year, it appears that no deal will be forthcoming and the Dodgers (and perhaps more disheartening, Vin Scully in his last year) won't be on many TV sets this summer in LA.  Kevin Drum essentially says bravo to the cable companies for opposing the Dodgers bid to jack up basic cable rates in the area.

Boo hoo. They tried everything—everything, I tell you. Except, of course, for the one thing that would have worked: the right to make the Dodgers an extra-cost option, not part of basic cable. Most cable operators see no reason that every television viewer in the LA basin should have to pay 60 bucks a year more in cable fees regardless of whether or not they care about baseball.

And that's the one thing TWC won't do. Why? Because then it will become crystal clear just how few households actually care enough about the Dodgers to pay for them. And that would truly be a disaster beyond reckoning. There's a limit to the amount of sports programming that people are willing to have crammed down their throats!

I actually agree with him, and will add that it is always great to see a progressive acknowledge consumers do actually exercise accountability on businesses.

But I will observe that had we adopted cable neutrality rules** as we have for net neutrality, the cable companies would have found it impossible, or at least much more difficult, to oppose carriage by a pushy and expensive content provider.  It is this sort of intra-supply-chain tug of war that generally benefits consumers in the long run (as it has in LA, at least for Drum) that is essentially outlawed by net neutrality rules which basically declare content providers the victors by default.  As I wrote before:

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators....

I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking.

** Footnote:  OK, we sortof did have cable neutrality in one respect -- over the air broadcasters were able to obtain crony legislation that cable companies had to carry every locally broadcast channel.  So that channel 59 that you never bothered to watch now get's equal treatment with the NBC affiliate.   This was a huge boon for these stations, and the value of these often tiny stations exploded with this must-carry rule.  Essentially they were given an asset for free, ie position in a cable lineup, that other competitors had to fight for.

Al Gore, as an aside, actually became rich with exactly this game.   It is hard to fight your way into a cable lineup nowadays.  Al Gore did it with this Current TV startup based on his name and a promise of a sort of MTV for politics.  The channel went nowhere and lost a lot of money, but it now had one valuable asset -- placement in cable TV lineups.  So it sold this asset to Al Jazzera, which had struggled to get placement.

Net Neutrality: I Told Your So

From the WSJ (emphasis added):

Netflix now admits that for the past five years, all through the debate on net neutrality, it was deliberately slowing its videos watched by users on AT&T and Verizon’s wireless networks. The company did so for good reason—to protect users from overage penalties. But it never told users at a time when Netflix was claiming carriers generally were deliberately slowing its service to protect their own TV businesses—a big lie, it turned out.

All this has brought considerable and well-deserved obloquy on the head of Netflix CEOReed Hastings for his role in inviting extreme Obama utility regulation of the Internet. Others deserve blame too. Google lobbied the administration privately but was too chicken to speak up publicly against utility regulation.

But Netfix appears to have acted out of especially puerile and venal motives. Netflix at the time was trying to use political pressure to cut favorable deals to connect directly to last-mile operators like Comcast and Verizon—a penny-ante consideration worth a few million dollars at best, for which Netflix helped create a major public policy wrong-turn.

This is what I wrote about net neutrality a couple of years ago:

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators....

I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking.

 

As A Reward for Introducing Price Competition into the Taxi Monopoly, Uber Gets Sued for Price Fixing

From Engadget:

After failing to get a class-action lawsuit dismissed, Uber CEO Travis Kalanick will go to court over price fixing claims. A US district court judge in New York ruled Kalanick has to face the class of passengers alleging that he conspired with drivers to set fares using an algorithm, including hiking rates during peak hours with so-called surge pricing. According to Reuters, district court judge Jed Rakoff ruled the plaintiffs "plausibly alleged a conspiracy" to fix pricing and that the class action could also pursue claims the set rates led to the demise other services, like Sidecar.

I guess this is the downside of calling all their drivers independent contractors -- it leads Uber potentially being vulnerable to accusations of price fixing among these contractors.  Of course, taxi cartels have been fixing prices for decades, but that is government-assisted price-fixing so I suppose that is OK.   It would be ironic that the first price competition introduced into the taxi business in decades is killed based on antitrust charges.

As with just about all modern anti-trust cases, this has little to do with consumer well-being and more about the well-being of supply chain participants (ie the drivers) and competitors (ie Sidecar and taxis).

The Administrative State

This is eye-opening:

In one recent year alone, Congress passed 138 laws—while federal agencies finalized 2,926 rules. Federal judges conduct about 95,000 trials a year, but federal agencies conduct nearly 1 million. Put all that together and you have a situation in which one branch of government, the executive, is arrogating to itself the powers of the other two.

This probably understates the case.  Most of the laws were probably brief fixes or extensions or for national _____ day declarations.  The administrative rules can be thousands of pages long and create nightmarish compliance issues.  Already, most of our businesses compliance efforts (which seem to be rising exponentially in time and cost) are due to administrative rules changes rather than new laws per se.

I find the judicial issue potentially even more concerning.  While we have pretty well-protected due process rights in court, most of these get tossed aside in administrative hearings and trials.

Democratic Socialism

Not sure where this came from:

bernie sanders democratic socialism

Thomas Sowell writes:

What President Obama has been pushing for, and moving toward, is more insidious: government control of the economy, while leaving ownership in private hands. That way, politicians get to call the shots but, when their bright ideas lead to disaster, they can always blame those who own businesses in the private sector.

What President Obama has been pushing for, and moving toward, is more insidious: government control of the economy, while leaving ownership in private hands. That way, politicians get to call the shots but, when their bright ideas lead to disaster, they can always blame those who own businesses in the private sector.Politically, it is heads-I-win when things go right, and tails-you-lose when things go wrong. This is far preferable, from Obama's point of view, since it gives him a variety of scapegoats for all his failed policies, without having to use President Bush as a scapegoat all the time.

Back in the 1920s, however, when fascism was a new political development, it was widely -- and correctly -- regarded as being on the political left. ....Mussolini, the originator of fascism, was lionized by the left, both in Europe and in America, during the 1920s. Even Hitler, who adopted fascist ideas in the 1920s, was seen by some, including W.E.B. Du Bois, as a man of the left.

People get blinded (probably for good reason, given the heinousness) by Hitler's rounding people up in camps and can't really get beyond that in thinking about fascism.  Which is why I sometimes find it helpful to use the term "Mussolini-style fascism".   And the US Left, led by FDR, was very much in thrall with portions of Mussolini-style fascism, so much so that the National Industrial Recovery Act was a modelled on Mussolini's economic management of command and control by corporatist boards.   Here is one description:

The image of a strong leader taking direct charge of an economy during hard times fascinated observers abroad. Italy was one of the places that Franklin Roosevelt looked to for ideas in 1933. Roosevelt's National Recovery Act (NRA) attempted to cartelize the American economy just as Mussolini had cartelized Italy's. Under the NRA Roosevelt established industry-wide boards with the power to set and enforce prices, wages, and other terms of employment, production, and distribution for all companies in an industry. Through the Agricultural Adjustment Act the government exercised similar control over farmers. Interestingly, Mussolini viewed Roosevelt's New Deal as "boldly... interventionist in the field of economics." Hitler's nazism also shared many features with Italian fascism, including the syndicalist front. Nazism, too, featured complete government control of industry, agriculture, finance, and investment.

The NRA has to be in the top 10 best overturn decisions by the Supreme Court.  Thought experiment -- do you think you could buy a Honda, Toyota, Tesla, Nissan or Kia in the US today if GM and the UAW were running the automotive board?

I Would Really Like to Get Elizabeth Warren and Other Progressives On the Record Right Now About Sub-Prime Auto

To me, the sub-prime auto loan market looks exactly like the home mortgage market in about 2006.

Back before 2009, Progressives were pushing like crazy to get banks to write mortgages to low-income borrowers with bad credit.  Banks that refused to do so would face the wrath of the banking regulators and lawsuits over redlining and ever other thing the Left could think of.   Seriously, if you had tried to stop sub-prime lending in 2006 the Progressives would have excoriated you as being racist, hating the poor, etc.  When the whole mess inevitably collapsed, the Progressives suddenly were there blaming this lending to low income people on the banks, accusing them of predatory lending practices.

OK, so now it is 2006 in the consumer credit market, and specifically in auto loans.  Banks are making crap loans to no-credit individuals on cars and getting them off the books by securitization.   So let's get Elizabeth Warren on the record right now.  Should banks stop lending to these no-credit low-income people?  My bet is that she would support this lending, doubly so because the Obama Administration feels on the hook still for their GM and Chrysler bailouts and would rather not see these companies tank (which they would if sub-prime credit suddenly dried up).  So, before she can piously accuse banks of predatory practices 3 years hence when it all collapses, I want to know what Elizabeth Warren thinks of all this right now.

Update:  Well, good news and bad news.  Good news is that Elizabeth Warren has criticized sub-prime auto.  Bad news is she appears to be totally on the wrong track with causes, talking not about the fact the loans should not be written at all but about the fact that she thinks dealers are reaping huge profits marking up the loans.  It would be interesting to see what the Obama Administration would think about a clamp-down on sub-prime auto.  Methinks they might freak out at that, knowing sub-prime loans are all that is keeping US automakers out of a new recession.

Life in California -- A Tax on a Tax

I just got a bill for some extra property tax I owe to a county in California.  The story behind it is sad and sort of hilarious.

A year or two ago I got billed in an audit for some "California use tax" on some golf carts we moved to California from Arizona.  I hadn't thought I owed use tax on them because I paid sales tax in Arizona where I bought them.  But California sales tax is higher than that in Arizona (naturally) so I apparently owed use tax on the difference.  OK, I paid it.

Then, just recently, I was informed by one county in California that my property tax reports were wrong.  I reported the value of the gold carts based on what I bought them for but I did not include the California use tax in the value.  That had to be added to their value (even though in actuality the use tax made them less valuable).  Anyway, I got a tax bill for the property tax I owe on the value of the use tax I paid for carts, which in turn was based on the higher rate  of sales taxes charged in California than Arizona.   All because I actually moved business assets into California.

Won't make that mistake again!  Over the last 5 years I have pulled nearly a half million dollars in business assets out of California, terminated 5 contracts, and laid off nearly 100 employees there -- all mostly due to the hostile business environment there.

My New Hero, and How the Department of Labor Bought Me Drinks

A while back, I was in Houston and having dinner at the bar of one of my favorite steakhouses (Eddie V's).  The guy next to me was apparently the owner of a gate guard company.  Given that what he does is sort-of similar in some ways to what my company does, we chatted for a bit.

Anyway, he asked me at one point if my employees were independent contractors.  I told him no, even though by the text of labor law they probably could be.  However, even if it would be legal by statute, life was too short to try it because the Department of Labor HATES the independent contractor designation.  This designation has the effect of making the Department of Labor irrelevant (since most of what they enforce does not apply to independent contractors) and there is nothing worse than making a regulator irrelevant.  In effect, while defensibly legal, making such a designation would be like putting a big "kick me" sign on my back and inviting years of Department of Labor harassment.

This is when he told me that his gate guards are independent contractors and that he actually beat the Department of Labor.   Not only did he win his case and get awarded a million two in attorneys fees from the DOL, but he was also awarded $300,000 from the court for aggravation. I refused to believe him until he showed me a picture of him with the check. He had had it blown up into one of those huge golf tournament checks. I told him he was my hero and tried to buy him drinks the rest of the night, but when I got up to leave, I found he had actually paid my tab.  I drank that evening on the Department of Labor's dime, I guess.

The next morning, I couldn't shake the sense that he was having me on.  After all, one might eventually prevail against the bureaucracy (I once won my own case against the DOL).  But attorneys fees?  And a payment for aggravation?

But it turns out to all be correct.  A couple of weeks ago the indispensible Walter Olson featured the Gate Guard story in an article at Cato.  From the judge's decision:

It is often better to acknowledge an obvious mistake than defend it. When the government acknowledges mistakes, it preserves public trust and confidence. It can start to repair the damage done by erroneously, indeed vindictively, attempting to sanction an innocent business. Rather than acknowledge its mistakes, however, the government here chose to defend the indefensible in an indefensible manner. As a result, we impose attorneys’ fees in favor of Gate Guard as a sanction for the government’s bad faith.

At nearly every turn, this Department of Labor investigation and prosecution violated the department’s internal procedures and ethical litigation practices. Even after the DOL discovered that its lead investigator conducted an investigation for which he was not trained, concluded Gate Guard was violating the Fair Labor Standards Act based on just three interviews, destroyed evidence, ambushed a low-level employee for an interview without counsel, and demanded a grossly inflated multi-million dollar penalty, the government pressed on. In litigation, the government opposed routine case administration motions, refused to produce relevant information, and stone-walled the deposition of its lead investigator.

By the way, for small business owners, I wrote (a long time ago, at least in the blogging world) a multi-part article with a description and my advice from my run-ins with the Department of Labor.  Part 1 begins here.

Can Congress Keep Its Hands off Anything?

Representative introduces bill set set minimum airplane seat pitch.

Where Are the Gender Warriors When You Need Them?

The other day I reported on the new, quite onerous race and gender reporting being proposed by the Obama Administration.  One thought I had when I was thinking how we might implement this -- the forms only have two gender options, Male and Female.

For most of us, that might seem almost tautological, but for certain gender warriors this is an act of hostility beyond imagination.  How can the government assume people only self-identify in 2 genders?  What about Agender, Androgyne, Androgynous, Bigender, Cis, Cisgender, Cis Female, Cis Male, Cis Man, Cis Woman, Cisgender Female, Cisgender Male, Cisgender Man, Cisgender Woman, Female to Male, FTM, Gender Fluid, Gender Nonconforming, Gender Questioning, Gender Variant, Genderqueer, Intersex, Male to Female, MTF, Neither, Neutrois, Non-binary, Other, Pangender, Trans, Trans*, Trans Female, Trans* Female, Trans Male, Trans* Male, Trans Man, Trans* Man, Trans Person, Trans* Person, Trans Woman, Trans* Woman, Transfeminine, Transgender, Transgender Female, Transgender Male, Transgender Man, Transgender Person, Transgender Woman, Transmasculine, Transsexual, Transsexual Female, Transsexual Male, Transsexual Man, Transsexual Person, Transsexual Woman,  and Two-Spirit?

What we need is for the gender warriors to tie up this regulation in 15 or 20 years of litigation.

(By the way, each new gender added, by the nature of how the data reporting is set up, adds an additional 1800 fields to the report).

New EEOC Payroll Reporting Rule Proposed -- I am Officially Exhausted With This Administration

I have written here before that all the free time I used to invest thinking about how to improve my business has been spent over the last 4-5 years solely on figuring out how to comply with new government regulations.  We are still trying to figure out the ins and outs of required Obamacare reporting, we have no idea yet how we are going to comply with new rules turning all of our salaried managers into timeclock punchers, and now there is this:

On the anniversary of President Barack Obama signing the Lilly Ledbetter Fair Pay Act, the Equal Employment Opportunity Commission has announced proposed changes to its EEO-1 report, requiring employers to submit employee W-2 earnings and hours worked. All employers with at least 100 employees would be required to comply. EEOC and the Office of Federal Contract Compliance Programs (OFCCP) would jointly have access to the pay data for enforcement purposes.

Available are advance copies of the proposed rule and the proposed pay reporting form.

While the Obama Administration’s January 29 statement announcing the proposal focused mainly on the gender “pay gap” as the basis for the new requirements, the proposed changes will mandate submission of pay data broken down by race/ethnicity, in addition to gender.

For the past few years, at the President’s direction, EEOC and OFCCP have sought to develop a reporting tool that would require employers to submit pay data on employees nationwide so the agencies can target investigations to address the gender “pay gap.” This proposal is the culmination of that effort.

The proposed rule will be published on February 1 and interested parties will have 60 days to submit comments.

Forget for a moment that the whole purpose of this rule is to provide litigation attorneys a database they can mine to legally harass businesses.  The reporting requirements here are incredibly onerous.  It takes the current EEO-1 (the annual exercise where we strive for a post-racial society by racially categorizing all of our employees) and makes it something like 15-20 times longer.  In addition, rather than simply "count" an employee as being on staff in a certain race-gender category, we now have to report their income and hours worked.  Either I will have to hire staff just to do this stupid report, or I will again (like with Obamacare) have to pay a third party thousands of dollars a year to satisfy yet another government reporting requirement.  This is utter madness.

Get this -- the report has 3600 individual cells that must be filled in.  And this is in addition to the current EEO-1 form, which also still has to be filled out.  The draft rule assumes 6-7 hours per company per year for this reporting.  They must be joking.

In the past, I have merely asked each local manager to tell me how many folks they have in each racial category.  Now, I am going to have to put everyone's race and gender into the payroll system -- there is no other way to do this.  And by the way, I just checked.  I have a very capable payroll company and I don't see any way to report wages and hours by race.

Congratulations Obama Administration, but I believe you have made me a Republican voter in the next Presidential election.  I have not voted for a Republican for President since George HW Bush, generally voting for whatever libertarian candidate is present.  For a while, particularly when one compared GWB to Bill Clinton, Republicans just were not that much better on economic issues than Democrats and they were terrible on social issues and things like immigration.  Now I am going to have to hold my nose on all that stuff and become a one-issue voter like my wife (she votes solely on abortion availability) and vote solely for people who have some prospect of not larding on more of this kind of crap.  And while I don't know the R's very well, for sure Hillary and Bernie will just be more of the same.

Update:   More here from the same source, who has the same observations about what a joke the administrative burden calculations are that I had.

When Julia Tried to Start a Business

I was doing a radio interview and was reminded of this article I wrote in response to the famous Obama "Life of Julia" piece extolling the virtues of government in our lives.  Since I spend so much of my time in the last few years finding ways to comply with ever more onerous regulations (rather than actually improving my business or customer service) I thought I would offer a different view.  When I argue that free market proponents need to talk about taxes less and regulation more, this is what I am thinking about.

Since it has been several years since this went up at Forbes, I want to reprint it here in full:

Last week, the Obama Administration released a campaign piece about the life of Julia, showing how Julia benefited from taxpayer largess and oversight by the state at many points in her life. But the campaign piece was incomplete, and missed the part where Julia attempted to start her own business. Long before she started a web business out of her home, she tried to start a retail business.

Julia always liked the outdoors — remember that taxpayers helped her retire from productive work so she could work in a community garden. Well, as she was growing up, Julia loved to camp outdoors. For years she camped at a lovely lakefront public campground until it was forced to close — unfortunately, the government agency that ran the campground had operating costs that were so much higher than the fees charged to visitors that they couldn’t afford to keep it open any longer.

But Julia had an idea. After forming a corporation (a surprisingly easy task with lots of private companies competing to help one complete the proper legal steps), Julia approached the public parks agency about the possibility of her leasing the campground and reopening it under private management. She was surprised, though, at the tremendous opposition she encountered in the agency. Despite the fact that she was willing to adhere to operating standards and restrictions set by the public agency, she initially encountered tremendous resistance. She had assumed a parks and recreation agency would welcome the opportunity to reopen a park to the public, be she had underestimated the near universal opposition to private enterprise she found among the agency’s employees.

Eventually, though, with a lot of hard work and some help from a local TV station that rallied park users to her cause, the public agency agreed to a one-year pilot of her idea.

So the hard part was behind her, right? Probably not. In fact, Julia expected entrepreneurship to be tough. She was worried about the challenges of hiring good employees, getting financing for new equipment, and marketing her new campground. As it turned out, though, she would have little time for any of these concerns.

Before she could even think about hiring employees, she had to get a federal tax ID number, or FEIN, for her company. This identification number allows her to collect and pay her employee’s Social Security and Medicare taxes, as well as withhold and submit the Federal income tax obligations of her employees. In addition to these reports, she also learned that she had to file a separate report each quarter on her employee’s earnings in order to file and pay Federal unemployment taxes.

But her state has its own income tax, so she had to register for a separate ID number to report and pay employee state tax withholding, and then had to fill out yet another registration for another ID number to file another regular report to pay state unemployment taxes. Her state also has a public rather than private workers compensation system, so she registered for another number so she could fill out another monthly report to pay state workers compensation premiums.

And of course, since Julia intends to make retail sales, she needed to register with the state (yet another number and report) to collect and pay sales tax — though her state calls it a “privilege” tax rather than a sales tax because, as the state’s web site explains, conducting commerce is a privilege that can only be exercised with the state’s permission. She is momentarily encouraged when she finds out her state sales tax does not apply to camping, only to eventually find out this is because the state has a completely separate system (yes, another registration number and monthly report) for collecting and paying lodging taxes. So sales in her campground store will be at one tax rate on one report while campsite rentals in the same park will pay a different tax rate on a different report. Which seems overly complicated until she finds out her county also has a separate sales and lodging tax that are added to the state’s, and must be reported separately under a different registration number to the County. Thank goodness she is not in a city, or she could easily have had to file and pay three separate sales taxes and three separate lodging taxes (city, county, state). If she ever decides to rent boats on the lake, she will have to get another state registration to pay a special state boat rental tax, the percentage of which varies based on whether a boat is motorized or human-powered.

Whew. Julia thought she had finally tracked down all her tax registrations, but she was wrong. Her corporation is an S-corporation, so she files and pays her corporate income taxes on her individual return. But it turns out her state also has a franchise tax on corporations she must pay separately, based on her total revenues. In addition, it turns out that each year she must produce a complete list of all her businesses personal property, from lawn mowers to computers to radios to chairs, and submit this list to the County so she can pay property taxes on all these items. Unfortunately, in her state the property tax bill does not end there. When the public agency was running the campground, the county was not allowed to charge another government agency property taxes on the assets. The agency still owns the property — it is just leasing it to Julia so she can operate it — but the county has a mechanism called the Leasehold Excise Tax to make Julia pay the property taxes the agency doesn’t have to pay.

So twelve registration numbers and 12 monthly/quarterly/yearly reports later, surely Julia has fulfilled all her obligations to the government. Unfortunately, no, because she has not even begun to address licensing issues. To begin, the County will require that she get an occupancy permit for her campground, which must be renewed annually. This seemed surprisingly easy, until someone from the County noticed she had removed an old rotting wooden deck from the back of her store that had been a safety issue and an eyesore. It turns out she was in violation of County law because she did not get a removal permit first. She was required to get a permit retroactively, which eventually required payments to seven different County agencies and at one point required, for a reason she never understood, the collection and testing of a soil sample.

Because she will be selling packaged foods in her store (e.g. chips and pop-tarts), she also has to get a health department license and inspection. She had originally intended to keep some fresh-brewed coffee for customers in the store, but it turned out that required a higher-level health license and eight hours training in food handling. She might have been willing to pursue it, but the inspector told her that to make coffee, she would need to install a three-basin stainless steel wash-up sink plus a separate mop sink in her store, and she decided that coffee would have to wait.

Once through the general health licensing process, she then needed to obtain licenses for individual products. She wanted to sell aspirin, so she had to get a state over-the counter drug sale license. She knew that customers would want cigarettes, so she had to obtain a tobacco sales license. One day as she was setting up, a state inspector noticed she had a carton of eggs in her cooler, and notified her she needed a state license to sell eggs (as Dave Barry would say, I am not making this up). And then there was the problem of beer.

She knew that selling beer would require an alcohol license. In addition to requiring a long, tedious application, getting such a license required that she be finger-printed at the local Sheriff’s office, that she measure the distance in feet to the nearest three stores that sold alcohol and the nearest school and church, and that she attend eight hours of special alcohol sales training. The whole application process took many months — at one point her application was kicked back to her because she included a computer CAD drawing of the store when the instructions require the drawing be made by hand (I repeat, I am not making this up). She finally thought she was home-free, when she found her state requires a public hearing as a final step to determine if the market really needs another liquor retailer. At that hearing, several large, powerful local liquor businesses testified that the market was already saturated and that they already had plenty of competition, thank you very much, and her application was denied.

By the time Julia called it quits, she still had multiple applications pending. She hadn’t yet figured out how to create the stormwater runnoff management plan needed for her stormwater permit. She hadn’t been able to satisfy the state air resources board in permitting her small above-ground fuel tank. And she was still going back and forth with the state department of water resources for her drinking water sampling and testing plan.

Julia gave up her dream of working outdoors, and spent the rest of her life closeted in a room staring at a computer screen. It wasn’t what she really wanted to do, but web design does not require a license (yet) and she could avoid the hassles involved with having employees. The public never got its park back, and the campground still sits closed, the facilities falling apart from neglect. But a few months after Julia gave up, a park agency employee wrote a scathing editorial in the local paper, citing Julia’s failure as a great example of how private enterprise has failed and the need for public agencies to do more.

Julia’s experience is a composite, but is based entirely on my personal, real experiences. Every tax, registration, report, inspection, and license mentioned is a real one my company has had to obtain at some point in our expansion to new states. The only difference is in the story of the liquor license, where after my local competitors initially blocked the license I had the wherewithal to fight and eventually get it issued.

More Evidence Against My Least Favorite Legislation of the 20th Century

I have written about the National Industrial Recovery Act many times, a love-note from FDR to Mussolini's fascist economic system that was thankfully overturned by the Supreme Court.  Its intent was to make the corporate-crony state the default economic system of the US.

Essentially, the NIRA cartelized the US economy, creating government-sponsored cartels in every industry that would set prices and wages as well as output and quality.  You can imagine exactly how well upstart competitors would have fared under this system.  I am pretty sure, for example, that the government mainframe cartel would never have let apply, or even DEC, see the light of day.

Now, a couple of academics have laid the blame for the long duration of the Great Depression at the NIRA's doorstep.

"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."

Using data collected in 1929 by the Conference Board and the Bureau of Labor Statistics, Cole and Ohanian were able to establish average wages and prices across a range of industries just prior to the Depression. By adjusting for annual increases in productivity, they were able to use the 1929 benchmark to figure out what prices and wages would have been during every year of the Depression had Roosevelt's policies not gone into effect. They then compared those figures with actual prices and wages as reflected in the Conference Board data.
In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.

"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."

The policies were contained in the National Industrial Recovery Act (NIRA), which exempted industries from antitrust prosecution if they agreed to enter into collective bargaining agreements that significantly raised wages. Because protection from antitrust prosecution all but ensured higher prices for goods and services, a wide range of industries took the bait, Cole and Ohanian found. By 1934 more than 500 industries, which accounted for nearly 80 percent of private, non-agricultural employment, had entered into the collective bargaining agreements called for under NIRA.

Hmm.  Certainly wages and prices are going to be especially "sticky" if the government creates cartels to keep them that way.

Great Moments in US Energy Policy: In the 1970's, The US Government Mandated Coal Use For New Power Plants

What does government energy policy have in common with government food advice?  Every 30-40 years the Federal government reverses itself 180 degrees and declares all the stuff that they said was bad before is now good today.

Case in point:  Coal-fired electrical generation.  Coal is pretty much the bette noir of environmentalists today, so much so that Obama actually pledged to kill the coal industry when he was running for office.   The combination of new regulation combined with the rapid expansion of cheap natural gas supplies has done much to kill coal use (as illustrated by this bankruptcy today).

But many people may not realize that the rise of coal burning in power plants in the US was not just driven by economics -- it was mandated by government policy

Federal policies moved in coal's favor in the 1970s. With the Middle East oil crisis, policymakers began to adopt policies to try and shift the nation toward greater coal consumption, which was a domestic energy resource. The Energy Supply and Environmental Coordination Act of 1974 directed the Federal Energy Administration to prohibit the use of oil or natural gas by electric utilities that could use coal, and it authorized the FEA to require that new electric power plants be able to use coal. The Energy Policy and Conservation Act of 1975 extended those powers for two years and authorized $750 million in loan guarantees for new underground low-sulfur mines. Further pro-coal mandates were passed in the late-1970s.

I was aware of the regulations at the time as I was working in an oil refinery in the early 80's and it affected us a couple of ways.  First, it killed demand for low-sulphur heavy fuel oil.  And second, it sidelined several co-generation projects that made a ton of sense (generating electricity and steam from wasted or low-value portions of the oil barrel) but ran afoul of these coal mandates.

On Immigration, Conservatives Sound Just Like Socialists

The other day John Hinderaker of Powerline wrote:

If someone proposes that next year we should import 10,000 unskilled immigrants from Pakistan, the first question we should ask is: why do we need them? But that is the one question that no one ever seems to pose.

This is a terrible question and to my eye shows just how close Conservatives come to accepting many of the assumptions of Socialism.

Socialists seldom think in terms of individuals, but instead talk about the economy as some great big machine that they get to run.  We all remember Bernie Sanders saying

“You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country”

When Hinderaker is asking if we need more immigrants, or Sanders is asking if we need more deoderant choices, they are both working from an assumption that some authoritarian gets to sit at the top and make these choices for us.

The question "do we need immigrants" is actually senseless. Who is "we"? Who gets to make decisions for "we"? Only a socialist thinks this way. In a free society, the questions that matter are "Do I want to hire this immigrant?" or, as an immigrant, "do I want to take the chance of moving to an unfamiliar country to try to better my life." If I wish to hire someone from another country and they wish to move here and take the job, what the hell does it matter if John Hinderaker thinks this person is "needed"? I have decided I need a certain immigrant for my business, and the immigrant has decided that moving here is a good tradeoff for him.  In capitalism, that should be a done deal.

Could the immigrant or I be wrong about my employment offer being a good idea? Sure.  But authoritarian government second-guessing of individual decisions is supposed to be a progressive-socialist game, and here is a prominent Conservative doing exactly the same thing.  If Bernie Sanders wanted to require me to get government permission to produce a new flavor of deodorant, Hinderaker would be outraged.  But never-the-less he similarly wants me to get government permission (actually he wants to deny me government permission) to hire the employee I want to hire.

All this "Amercan jobs for Americans" thing may sound nice, and get head nods at the local Rotary, but what it actually means is that individual business people like myself have to be limited to hiring from a government-approved list.  Doesn't sound much like the free markets and small government Conservatives claim to want.

Hinderaker quotes approvingly from David Frum

However one assesses [the Farook family] chain and its consequences, it seems clear that the large majority of legal immigrants choose to come—or, more exactly, are chosen by their relatives—for their own reasons. They are not selected by the United States to advance some national interest. Illegal immigrants are of course entirely self-selected, as are asylum seekers. …

Donald Trump’s noisy complaints that immigration is out of control are literally true. Nobody is making conscious decisions about who is wanted and who is not, about how much immigration to accept and what kind to prioritize—not even for the portion of U.S. migration conducted according to law, much less for the larger portion that is not.

Doing things for one's own reasons.  Self-Selection.  Lack of government control.  Lack of government decisions about who or what is wanted.  Lack of national priorities.  These all sound like ... capitalism and a free society.   Replace the word immigration with any other term and Conservatives would blast these two sentences and Bernie Sanders and Barack Obama would vigorously nod.  I could write a $15 minimum wage screed using almost these identical words from Frum.    Here, let me try:

However one assesses [the John Smith] $8 wage and its consequences, it seems clear that the large majority of employers set wages for their own reasons. These wages are not set by the United States to advance some national interest. The wage rates are entirely self-selected by employers and employees.

Bernie Sanders's noisy complaints that wage rates and income inequality are out of control are literally true. Nobody in government is making conscious decisions about who is hired and for how much, about how much income to accept and what kind to prioritize.

Postscript:  Yes, I know that Conservatives are all worked up because 1 in a 1,000 or so of our immigrants might be murderers.  You know what, one in a thousand Americans born every day will likely grow up to be murderers, but we don't ban sex.  We accept the consequences that we get a few bad apples along with a lot of awesome productive people.

I would also ask Conservatives this -- why don't you think the Left's desire to ban gun ownership to head off mass shootings is fair?  I would suggest one reason is that it is unfair to ban legal gun ownership for 1,000 good people because one will use their gun to commit a murder.  If you agree with this statement, explain why your argument against immigration is different from the Left's call to ban gun ownership.