Coyote Blog

Here is as good a reason as any why many businesses (like mine) are currently reluctant to invest:

I’ve noted any number of times that government taxes comprise 14% of the national income and government spending is at 25% of the national income.

OK, so politicians have two alternatives — they can make tough choices to reduce spending and reduce their own power, or they can just take more money from taxpayers and in so doing increase their personal power.  Gee, I wonder which will occur?

Combine this is a health care bill no one understands but everyone suspects will raise the price of labor and a climate bill that won’t quite die that will raise the price of energy and therefore most other inputs, and is it any wonder that businesses are reluctant to invest when their three highest costs (taxes, labor, energy) are going up by some undetermined amount?

Econlog tells the story of how the FDA is blocking a drug for Restless Leg Syndrome because massive doses caused cancer in a few rats.  Millions of humans have taken the drug with no ill effect, but let a few rats dies, and the FDA refuses to approve it for a new use.

This reminded me of a story I meant to point out from the winter Olympics.  I think many people saw the US Bobsled team win the gold, piloted by Steve Holcomb.  Perhaps you heard the story of how Holcomb would have had to give up the sport several years ago due to a vision disorder until a new operation restored his sight.  But note the clause I have bolded:

Traditional corneal surgery would have left his eyes susceptible to damage from a jarring bobsled run. So last March he underwent a radical procedure, yet to be approved by the FDA, in which doctors implanted a lens behind each iris. When he woke from the surgery, Holcomb immediately noticed the detail of the palm trees in one of the posters on his doctor’s wall. “An hour before, I didn’t even know there were posters,” he says. “It was a new world.”

I wonder how many hoops he had to jump through to get the operation, and whether average people who are not on the Olympic team would have been able to get the same benefits.

From the SEC web site (via frequent contributor LK)

The Securities and Exchange Commission today voted to provide public companies with interpretive guidance on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change.

I haven’t seen anyone explain the reason for this requirement, so I thought I would do so.  Companies know that no real investor is going to pay any attention to these climate disclosures, so to avoid any future action accusing them of not being forthcoming enough, companies are going to go overboard outlining potential risks far beyond what they think is likely.  These exaggerations will protect them from the SEC while at the same time having no effect on their stock price.  Then, alarmists will collate all of these and use them as evidence of the high cost of climate change, saying “see, look at what all these public companies are saying climte change will do to them.”  Lacking any evidence of harmful climate change in the actual climate or economy, this is one way to manufacture fake evidence.

By the way, here is the diclosure every oil company should put in their reports:

Notice:  Poplist politicians are very likely to demagogue this company for a wide-range of imagined crimes in an attempt to get re-elected, including crimes against the climate in various forms.   Politicians will attempt to preferentially saddle this company with new taxes and regulations given that this company is not liked by many voters (despite the fact that many of these voters freelydo business with this company).  Politicians will likely continue to try to sieze portions of this company’s earnings, despite the fact that those earnings are relatively low given the magnitude of the our investments and the amount of value we add.

I have written any number of times about how the justification for licensing is usually consumer protection or safety but the actual purpose is to protect larger, entrenched incumbents against competition.  However, most of those stories have been about caskets or hair braiding or other businesses that don’t really affect me.  This time, its personal.

Sometime last October we needed a boat moved across the country from one of our marinas to another.  We found a local guy who was going in the right direction anyway and paid him a couple hundred bucks to haul the boat on a trailer behind his pickup.  Note that this is a perfectly ordinary pickup truck and a perfectly normal pontoon boat, the kind of car-trailer rig you can see thousands of people driving to the lake every Saturday morning.

The driver was stopped at a checkpoint in Wyoming.  And was busted there, at least long enough until he could give them my name and number and escape.

Why was he busted?  Because a) the truck/boat combination apparently weighed a tad more than 10,000 pounds and b) the boat was being moved for a commercial purpose  (i.e. it was a business asset).  Unknown to me, the combination of these two takes this transport event to the realm of “commercial carrier,” which requires a Department of Transportation (DOT) license and a slew of regulatory responses.   Technically, the contractor we paid was at fault, but he escaped any legal problems because 1) he claimed he was our employee (untrue) and 2) he claimed he was driving our truck (untrue).  This led to Wyoming and later the DOT calling me asking for my DOT number (which I didn’t have), my employment records (for a person who is not my employee) and my vehicle records (for a truck I have never owned).

Months later, I am still going back and forth with the cops in Wyoming.  But in the mean time I decided that since I was likely to move my stuff across state lines again, I might as well get my DOT number.  So I started that process.

As it turns out, there is absolutely no difference in regulation and compliance requirements between driving my own boat across state lines once a year and running United Van Lines.   The regulations one has to know are hundreds of pages long.  The user-friendly summary is 162 pages long! And it is careful to state, “Please do not use this guide as a substitute for the Federal Motor Carrier Safety Regulations.“  There are driver and vehicle files that have to be maintained, special driver certifications, driver medical tests and certifications, etc.

In other words, there is absolutely no accommodation for a company like ours that is doing nothing different than you are driving you boat to the lake, but we have to set up a compliance and record-keeping system that trucking companies have whole departments for.  Which, of course, is the point.  Compliance costs for regulations can always be born easier by large companies and by incumbents.  The idea is to make it so onerous for individual companies to move their own boats that they are willing to pay over-priced Teamster-friendly trucking corporations to do it for them.  The point is not to make us safer – the average individual unregulated boater hauls boats more miles a year than we do – the point is to make sure we don’t compete, even in the smallest way, with established trucking firms.

By the way, the issue that is likely to kill the deal totally on our getting a DOT number is the government mandate that I drug test my employees.  The relationship I wish to have with my employees is not one that encompasses my demanding samples of their bodily fluids on a regular basis.  I have turned down at least two potentially lucrative management contracts because both had drug-testing requirements and I am not going to do it.

While private banks are paying back their TARP money, Fannie and Freddie have been given a new blank check:

It’s a favorite government trick to announce bad news on a Friday afternoon, so it appears in Saturday’s paper, the least likely edition to be read. By Sunday and Monday, it’s old news. The Obama Treasury just went one better, announcing on Christmas Eve that they were uncapping the amount they believe will have to be invested in Fannie and Freddie. The Bush Treasury first estimated the government-sponsored enterprises’ (GSEs) losses at $100 billion each. The Obama administration, which has been using the GSEs to stabilize the housing market by reducing their underwriting standards, upped the ante to $200 billion each. Now the administration has thrown in the towel completely, and dropped a large lump of coal in each taxpayer’s stocking—it won’t even try to estimate the total losses of Fannie and Freddie.

For extra special bonus style points, Fannie and Freddie executives will apparently receive multi-million dollar pay packages that the pay czar will be denying to many private banks.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

In other news, the Feds are also propping up another quasi-governmental agency with more cash

GMAC, the ailing financing arm of General Motors, is set to receive around $3.5 billion in government aid, ABC News has learned. The funds would be the third infusion of federal support for the troubled lender.

The latest government aid would bring the total federal assistance for GMAC to $16 billion when combined with the $12.5 billion that the lender has already received dating back to December 2008. Due to its prior cash infusions, the government already owns 35 percent of GMAC.

GMAC continues to lose money because every time it gets more taxpayer money, it starts offering zero percent financing deals.

Immediately after GMAC became eligible for TARP money, GM reduced to zero the interest rate… on certain models. This, of course, penalizes GM competitors, including Toyota, Honda and other “transplants” whose cars are made in America by Americans for Americans, and Ford, which does not have the freedom of maneuver conferred by TARP money because Ford is not taking any…

GMAC has begun making loans to borrowers with credit scores as low as 621, a significant relaxation of the 700 minimum score the company adopted just three months ago as it struggled to survive. America’s median credit score is 723…

This perhaps might explain why GM, unlike other banks with low stress-test scores, was unable to get any private capital.   Because lenders know GMAC will just hand the money over to car buyers with little prospect for getting any value back in return.  Incentives for GMAC to take losses to sell cars, always an issue under GM’s private management, will only increase as the Administration looks to create some evidence – any evidence – that their GM investment isn’t a total dog.  Witness $3 billion in cash for clunkers funds that went to buy $1 billion of used vehicles.

Postscript: Related news, the 10 most ridiculous uses of stimulus funds. Seems like there would be a lot of competition for this award.

Ever get that feeling like the Obama White House doesn’t have a clue as to what it takes to actually run a business, make investments, hire people, sell a product, etc?  There is a reason for that:

It has been fascinating to watch George McGovern change his tune about much of the regulatory state over the last 10 years as he has actually tried to run a business.

Megan McArdle has two posts here and here on consumer credit and payday loans.  My chief takeaway is that the majority generally benefits from the availability of diverse (though sometimes expensive) forms of consumer credit, while a minority are tragically and very visibly worse off.  The question seems to boil down to whether regulation should be crafted that relatively invisibly makes the majority worse off but visibly helps a minority.  This same question exists with programs from trade protectionism (where job losses due to foreign trade are more visible than the broader well-being of consumers and customer industries) to health care (where it looks like a lot of people will have worse health care to help a few people with visibly tragic stories). In all these cases are elites who are more than willing to opine that smart people like themselves should be allowed to force their “superior” decision-making on others.

The other thing I found intersting was her discussion of the Dave Ramsey anti-debt formula.  She imagines a Ramsey-ite world with a high savings rate.  But its a weird world with with lots of capital formation but little actual capital use.  My gut feel is that it is almost certainly a poorer world, given how much technology and new wealth is created by entrepeneurship.  While I am sure some do it, few great entrepeneurs created success without debt.

One thing neither post discusses is the role of loansharking and illegal forms of credit.  The need for credit strikes me to be at least as strong as the need to gamble or get illegal drugs.  If getting credit becomes illegal, then people will go underground for their credit, with almost certainly more dire consequences than over-paying a payday loan company.

Last week I wrote:

I had an employee in a truck towing a pontoon boat from a marina we operate in Alabama to a marina we operate in California.  Apparently, we have grossly violated the law because to haul our boat from our own facility in one state to our own facility in another requires that we register as an interstate motor carrier and put DOT numbers on all of our vehicles.  Just great.  Who wants to bet that this will be an enormous and expensive hassle?

I dumped the compliance task on my Chief Operating Officer, who routinely deals with a lot of really irritating compliance issues without complaining.  He sent me this email this morning:

I’ve now left at least 5 recorded messages for USDOT employees, and spoken to 3 of them. I almost have my arms around this compliance issue. This was a very cruel assignment…will never forget this

I had an employee in a truck towing a pontoon boat from a marina we operate in Alabama to a marina we operate in California.  Apparently, we have grossly violated the law because to haul our boat from our own facility in one state to our own facility in another requires that we register as an interstate motor carrier and put DOT numbers on all of our vehicles.  Just great.  Who wants to bet that this will be an enormous and expensive hassle?

Update: Credit where it is due:  The application online was totally arcane (and of course the help link and instructions links were broken) but the guy at the DOT help line was remarkably helpful and walked me through it.  It was pretty clear that a lot of folks who casually transport their private property across state lines gets swept up in this net, and they actually were prepared to be helpful.  I did have to laugh when the very first screen of the application process was to get my credit card number – I think this clarifies the reason for this licensing process.

I have shared before the main problem with all these new fake “rights”  (e.g. right to healthcare, right to a job, etc.).  Our original Constitutional rights were merely checks on government – they said the government could not pass laws to prevent us from doing certain things or invade our homes without some sort of due process, etc.  But these new rights require that some previously free individual be coerced into providing money or labor or both to supply others with these new rights.    I often use the desert island test – if you can’t have the right alone on a desert island, its not a right.

But what I had not realized until recently is that many of these new fake rights also share in common a level of compulsion on the beneficiary  (not just the payer and provider).  For example, you have the right to bear arms and engage in free speech, but you are not required to own a gun or speak in public.   But you will be required to use, and pay for, your new “right” to health care, at the threat of a term in prison.   In this light, its doubly perverse to call something like health care a “right.”  How can something which government uses compulsion on the payers, the providers, and the users be associated with so clean and moral a notion as a “right.”  Freedom of religion is a right.  Health care is a want.

I got to thinking about this even more with “the right to a job at a fair wage,” embodied in such laws as the Fair Labor Standards Act.  Proponents of such a right would consider it a victory that employers have been compelled to not pay less than $7.25 an hour for labor.   But the beneficiary is the subject of compulsion as well.  This law also means that I cannot sell my labor at less than $7.25, even if I am willing (even eager) to do so.    This means that if my choices are to sell my labor at $6.00 or for nothing, the government compels me to be unemployed.  My son is 16 and would like a retail job, preferably around books this summer.  Having real job experience and customer contact experience, for him at his age, is worth enough that he would likely work for free.  But he can’t work for free, because the Fair Labor Standards Act only allows compensation to be valued in monetary terms – non-monetary benefits like skills improvements don’t count.  So, given the economy, my son will likely not work next summer.  All for his own good, of course.

My company exited business in Washington State about 3 years ago, and since then I have routinely turned down new business opportunities in the state.  The workers comp system is expensive, the sales and lodging tax regime is both expensive and complicated, and minimum wage rates are set to crack $10 an hour, and are indexed in some raise that they seem to rise substantially every year.  The state made it very difficult to manage a fleet of vehicles in the state, and generally made it clear that they would rather me not doing business there.  So I don’t.

And apparently, Boeing has come to the same conclusion.

Via a reader, from the AZ Republic:

A Phoenix ordinance banning charity dining halls in residential neighborhoods withstood a challenge by a north-central Phoenix church.

Retired Arizona Supreme Court Justice Robert Corcoran, serving as a hearing officer, ruled Monday that feeding the homeless at a place of worship can be banned by city ordinance. The decision affects all Phoenix churches with underlying residential zoning.

Over the summer, city officials maintained that CrossRoads United Methodist Church, 7901 N. Central Ave., violated Phoenix zoning code by feeding the poor and homeless on its property, a use that can only occur in commercial or industrial zones.

You will be relieved to know that this has nothing to do with a wealthy people fearing that their Xanax-induced equilibrium will be upset by actually seeing a poor person in their neighborhood.   We are assured as such by Paul Barnes, a “neighborhood activist” who presumably participated in the suit to stop the Church from holding pancake prayer-breakfasts:

“It’s not a problem with homeless people in wealthy neighborhoods. That would be a matter of prejudice. This issue would be setting churches up to avoid zoning ordinances.”

Wow, I am so relieved.  And we all know what a problem it is when churches are organized solely to evade zoning regulations.  Why, just last week the First Baptist Church and Gas Station as well as the United Methodist Church and Topless Bar opened right in my neighborhood.

You will be happy to know as well that the Constitution in no way limits the government in any way when it wants to regulate your property:

In a 19-page opinion, [Judge] Corcoran said the city can restrict where the homeless and poor can be fed and that zoning regulations apply to everyone equally. Additionally, he said that trumping land-use regulations is not a constitutional right.

Whew – yet another assault on the rights of government bureaucrats has been bravely turned aside.

Update: More random embedding of ads by the Republic.  They are putting them between words in the paragraph now.  RRRRRR.  Hopefully it is gone now.

…except when we do.  I think everyone pretty much assumed that Obama’s promise of treating GM like a real business and not as a political plaything was BS from the start, particularly when Congress started intervening in dealer-closure decisions about 5 seconds after the promise left Obama’s lips.

Henry Payne has a roundup of Congressional micro-management at GM.  One example:

Chrysler and GM have moved aggressively to cut their transportation costs, effecting Teamster jobs and riling the union’s political friends. Chrysler, for example, will save 25 percent of its $111 million annual hauling budget by transferring to lower-cost carriers. But Michigan reps from both sides of the aisle are unimpressed, reports the Detroit News. “Relatively minor short-term cost savings generated by shifting this work to non-unionized companies is greatly outweighed by the elimination of good-paying, union middle-class jobs,” complains Michigan Republican Thaddeus McCotter.

What do “good-paying” trucking jobs have anything to do with GM’s health?

Via Maggies Farm and a commenter on TigerHawk:

During consideration of H.R. 3126, legislation to establish a Consumer Financial Protection Agency (CFPA), Democrats on the House Financial Services Committee voted to pass an amendment offered by Rep. Maxine Waters (D-CA) that will make ACORN eligible to play a role in setting regulations for financial institutions.The Waters amendment adds to the CFPA Oversight Board 5 representatives from the fields of “consumer protection, fair lending and civil rights, representatives of depository institutions that primarily serve underserved communities, or representatives of communities that have been significantly impacted by higher-priced mortgages” to join Federal banking regulators in advising the Director on the consistency of proposed regulations, and strategies and policies that the Director should undertake to enforce its rules.

By making representatives of ACORN and other consumer activist organizations eligible to serve on the Oversight Board, the amendment creates a potentially enormous government sanctioned conflict of interest. ACORN-type organizations will have an advisory role on regulating the very financial institutions from which they receive millions of dollars annually in direct corporate contributions and benefit from other financial partnerships and arrangements. These are the same organizations that pressured banks to make subprime mortgage loans and thus bear a major responsibility for the collapse of the housing market.

In light of recent evidence linking ACORN to possible criminal activity, Democrats took an unprecedented step today to give ACORN a potential role alongside bank regulators in overseeing financial institutions. This is contrary to recent actions taken by the Senate and House to block federal funds to ACORN.

ACORN was an important actor in the housing bubble, responsible for numerous lawsuits and other political pressure to force banks to lend to borrowers who by objective standards did not have the income or credit history to sustain mortgage payments.  It would be interesting to see how many mortgages ACORN was involved with have gone belly up.  But now, as part of the “solution” to the financial crisis, we will put ACORN in charge.

Forget all the BS political posturing about the consumer — the fact is that in the vast majority of its actions, the government is anti-consumer.  How else can one explain Administration officials criticizing China for selling goods to the US below cost.  “We’re sorry, consumers, that you have been burdened with product choices that have had their prices subsidized by the Chinese.   We’re working hard to fix this and make sure prices go back up where they should be.”

Licensing, trade law, anti-trust, even consumer products laws — its all become protection of politically connected corporations against smaller and upstart rivals.  Just look at how Mattel, whose sloppy due diligence forced a number of toy recalls last year, became the big winner of the new “consumer” law these recalls spawned.

Google voice is one of the more exciting communication products I have seen in years.  I have a phone number for free, I can have that number ring multiple different numbers while retaining a single voice mail — with a free transcription service.  Awesome.

So, of course, the FCC is probably going to kill it.  They will find some way to justify it on nominally consumer grounds, but they are really just doing AT&T a favor.  The argument is that Google voice blocks calls to certain high-access rural areas.  So what?  Heck, I use it mostly to receive calls but if I made calls, do I really want my phone bill to go up by four or five times just so I can call some phone numbers I am never going to call.

A lot of folks believe that antitrust law is mainly used for consumer protection.  That may have once been true, but it certainly is not true today.  Antitrust laws are used today by one group of competitors to try to hamstring another competitor in their business, usually one that is kicking their collective butts.

Here is the latest example:

The Justice Department is investigating allegations that International Business Machines Corp. has monopolized the market for mainframe computers, broadening Washington’s search for anti-competitive behavior in the technology industry.

The requests, a special kind of subpoena used in antitrust investigations, followed a complaint by [the Computer & Communications Industry Association—a group with many IBM rivals among its members] to the Justice Department accusing IBM of harming businesses by abusing its dominance of the market for mainframes.

Narry a customer or consumer to be found.  So what is the complaint?

the CCIA alleges IBM began to tighten its grip on the market by not allowing its newest software to be used on competitors’ machines.

Waaaaaaaa!  Develop your own freaking software.  The only reason these competitors have a product at all is due to another anti-trust settlement 50 years ago:

For decades, [IBM] operated under terms of a 1956 consent decree with the government that required it to license mainframe technology to competitors.

Roughly the equivalent of Coca-Cola being forced to license its formula to whoever wants it.

But I can prove this has nothing to do with consumers.  Take an earlier, similar case against IBM several years ago.

The lawsuits followed IBM’s decision not to license its newest mainframe operating system, called z/OS, to customers of Platform Solutions Inc., a company that made cheaper mainframes that were compatible with IBM’s.

In its complaint, Platform alleged that IBM was unlawfully “tying” its software to its mainframe hardware and requiring customers to purchase both.

Congratulations, this company was able to beat IBM on price when they bore no hardware development costs (IBM was forced to license its designs to them to copy) and obviously was a free rider on software as well.   But that is beside the point.  Here is the solution that settled the case:

That case was settled last year, after IBM purchased Platform and ended its business.

LOL.  I am pretty sure that if the anti-trust case had anything to do with customers, that increasing IBM’s market share and shutting down a low cost competitor would not have been considered an appropriate fix to IBM’s supposedly anti-competitive behavior.  Antitrust has devolved nearly entirely into a legal club to wack a competitor who is beating you in the marketplace.  In Europe, it has become a tool to wack foreign competitors to domestic companies without triggering trade retaliations (e.g. Microsoft, Honeywell).

The WSJ on new EPA CO2 rules under the Clean Air Act:

Usually it takes an act of Congress to change an act of Congress, but Team Obama isn’t about to let democratic—or even Democratic—consent interfere with its carbon extortion racket. To avoid the political firestorm of regulating the neighborhood coffee shop, the EPA is justifying its invented rule on the basis of what it calls the “absurd results” doctrine. That’s not a bad moniker for this whole exercise.

The EPA admits that it is “departing from the literal application of statutory provisions.” But it says the courts will accept its revision because literal application will produce results that are “so illogical or contrary to sensible policy as to be beyond anything that Congress could reasonably have intended.”

Well, well. Shouldn’t the same “absurd results” theory pertain to shoehorning carbon into rules that were written in the 1970s and whose primary drafter—Michigan Democrat John Dingell—says were never intended to apply?

It is interesting to see the Obama administration using the exact same logic to limit the reach of the Clean Air Act vis a vis Co2 emissions as the Bush Administration did to say the Clean Air Act should have not applicability to CO2 emissions.

Yet one not-so-minor legal problem is that the Clean Air Act’s statutory language states unequivocally that the EPA must regulate any “major source” that emits more than 250 tons of a pollutant annually, not 25,000. The EPA’s Ms. Jackson made up the higher number out of whole cloth because the lower legal threshold—which was intended to cover traditional pollutants, not ubiquitous carbon—would sweep up farms, restaurants, hospitals, schools, churches and other businesses. Sources that would be required to install pricey “best available control technology” would increase to 41,000 per year, up from 300 today, while those subject to the EPA’s construction permitting would jump to 6.1 million from 14,000.

So the Bush Administration argues that the Clean Air Act applies to 0% of CO2 sources and they are accused of breaking the law.  But the Obama Administration argues the Clean Air Act applies to 0.2% – 0.7% of sources and this is somehow a vastly superior legal argument?  The courts rejected 0.0% as non-compliant but they will accept 0.2%?

This post at Dr. Helen’s site is dead on.  She posts a number of comments from Don Surber’s site, starting with this one:

Commenter Sean says:

Businesses aren’t hiring because no one knows what in the hell our economic system is going to look like 5 years, or even 5 months, from now.

Will “Cap and Trade” get implemented as the Democrats hope?

How much of an upheaval will “Healthcare Reform” end up being?

Is the administration and Congress done overhauling regulation of the Financial Industry?

No prudent investor is going to bet their money (i.e., invest in growth) when it is conceivable that the government is going to radically alter how 50% of this nation’s economy functions.

This is exactly where I am right now.   The business I own has been growing at about 10% a year for the last five years.  In each of the last 3 years, we have invested an average of a half million dollars in new facilities.  In the past five years I have added over a hundred new positions in the company.

This year we will add ZERO.

It is not for lack of opportunity.  Because we are on the low-cost end of recreation, we have had a record year.  And because I am in the business of privatizing public recreation, my phone has been ringing off the hook.  All over the country, desperate public recreation authorities are calling me to say that they are out of money, their parks are about to shut down, and can I do something to keep them open.

To the extent we find opportunities to grow with limited investment, we are pursuing those.  But I just cannot put up any more capital in this environment.  If I make an investment, how much will the government let me keep?  How much are taxes going up (because they certainly are going up)?   Inflation simply must be around the corner given the monetary policy this country is pursuing — so will my business be able to raise prices fast enough to keep up with inflation in my inputs?

The legislative risks we face are tremendous.   My two highest costs are labor (50% of revenues) and fuel and electricity (about 10% of revenues).  Thus, nearly 2/3 of my costs are going to be increased by the current health care bill and cap-and-trade bill.  The only question is how much.   If forced to guess, I would estimate that my labor costs are going up 8% and my fuel costs by 20%,which when you compute these by their percentage shares, says that my costs will likely increase by at least 6% of revenues.  My current profit margin before tax is between 6 and 8 percent of revenues.  I may be able to raise prices fast enough to cover this, or I may not.  In a business with thin profit margins, there just isn’t much, uh, margin for uncertainty.

And none of this takes into account the proposed new paperwork load that will likely make my business less enjoyable to run (example of current mess).  From having to track and report our company’s greenhouse gas emissions to keep track of the health insurance choices made by every employee, it is sure to be ridiculously burdensome.

So I am going to wait it out for a while.

I am importing a fairly expensive art clock from Germany.  It hit Fedex in Memphis yesterday, then apparently hit a snag.  The US government demands that certain data on imported clocks be submitted to them before it can clear customs.  Fedex had to pay someone for about half an hour of work (to track me down, interview me on the phone, and submit the paperwork) so that this critical data could be submitted to the Feds:

I kid you not.  This would be one of the dumbest things I have seen from the government had it not been for the egg licenses I have to hold.  This data was probably critical for some program pushed through by a Senator to protect some business in his district that does not even exist any more.  I wonder if anyone in the government even remembers why this data is so vital (seriously, per question 11, how many wind-up clocks are coming through customs nowadays).  Probably part of a program to protect America’s essential capacity to manufacture clock movements over 12mm in thickness.

Alex Tabarrok discusses the new movie about Mark Whitacre and price fixing at Archer Daniels Midland.  ADM apparently was caught holding meetings with competitors to fix prices of certain chemical commodities, specifically Lysine.

Here was ADM’s mistake, and it is one they have clearly learned from:  in the modern American corporate state, there is no reason to engage in illegal private price fixing or cartel arrangements when corporations can achieve similar ends legally and openly through the government.  If ADM was concerned about difficult competition depressing pricing, they could have emulated any of these examples:

• Run to Congress to beg for strong tariff’s on foreign sources of their commodity product (as do the sugar and ethanol industries)
• Run to Congress and have them institute minimum pricing or buy up excess supply (as do many agricultural producers)
• Run to Congress to seek supply restrictions (as does the taxi business)
• Run to Congress and have them restrict new competition and sources of supply through licensure (as do a variety of industries, from real estate to funeral homes to medicine)
• Run to Congress to have them pass onerous legislation that makes it difficult for new capacity to be added in the business (as does the waste disposal industry)
• Run to Congress to seek subsidies for their product in the name of some public good – it doesn’t even have to be true (as does, well, ADM with ethanol)
• Run to Congress to seek regulations that favor your particular production and product technologies while hamstringing your competition (as does GE with light bulbs)
• Run to Congress and have them enforce an industry price-fixing arrangement — its legal when Congress does it (as do the Milk producers)
• Run to the FTC to bring anti-trust actions against your competition (as did Netscape and Sun against Microsoft)  This is an interesting article on this, which says in part, “Most [antitrust] cases are not brought by public representatives, whether elected or self-appointed, but by private companies, often rivals of the defendant who are being driven out of business. Businessmen believe that competition is good if they win but bad if the other guy wins.”

Of course, all of this takes a little care.  The competitive relief must be couched in something like “consumer protection” or “saving jobs” or “going green” or “fairness,” but there are plenty of good examples of consumers getting the shaft in the name of consumer protection that it shouldn’t be too hard to come up with something.  Developing a high profile in an early Presidential primary state like Iowa doesn’t hurt either.

As I said in the title, ADM has certainly figured this out, if their approach to the ethanol business is any guide.  In ethanol, they have resorted to any number of these tactics simultaneously.

The answer is:  Just about everyone who was not in the tank for the Obama Administration predicted this (from my Princeton classmate Henry Payne):

When Congress gave away $3 billion for buyers to trade in their “clunkers” and buy new cars in August, lawmakers thrilled as buyers swamped showrooms to take advantage of the big discounts. “Cash for clunkers has captured the public’s attention . . . (it) has the possibility to truly jumpstart our economy,” said Rep. Candice Miller (R., Mich.). Other, more sober analysts, warned that the clunkers program was only stealing from future sales.

September sales are in, and sobriety can take a bow.

Edmunds.com reports that “September’s light-vehicle sales rate will fall to 8.8 million units . . . the lowest rate in nearly 28 years, tying the worst demand on record. After the cash-for-clunkers program boosted August sales to their first year-over-year increase since October 2007, demand has plunged. In at least the last 33 years, the U.S. seasonally adjusted annual rate has only dropped as low as 8.8 million units once — in December 1981 — with records stretching back to January 1976.”

The real popularity of the program was always due to the fact that the government was throwing money away and people rushed to pick it up.  Edwards.com estimated the Feds purchased vehicles with average blue book values of just under $1500 for $3500 to $4500.  That means that the government purchased cars that blue booked at just over a billion dollars for three billion.  I you suddenly offered to buy all of your neighbors’ cars for three times what they were worth, you’d be popular too.   It was a $2 billion giveaway, and people rushed to pick the cash up like one of those money drops in the outfield of a minor league baseball game.  In doing so, the government made a trivial change in the overall fleet fuel economy, in the process overpaying for Co2 reduction by a factor of 20.

Update: The study linked above shows the government paying over $400 per ton of Co2 reduced in the Clunkers program.  The 20x factor cited was based on an estimated clearing price of a tone of Co2 in a future cap and trade system.  This is hypothetical, as currently a ton of Co2 offsets trades right now in the US at 20 cents.  At this price, the program overpaid by a factor of 2000.  To be fair, this reflects both estimated pricing as well as a discount for the likelihood of a cap and trade bill passing.

Kevin Drum links to a NY Times article that, mainly through annecdote, seems to be trying to fabricate the “next” consumer crisis, over debit card overdraft fees.  The key chart, containing about all the real non-annecdotal data in the article is below:

I wrote in the comments:

Wow, the NY Times almost fooled me with this chart. Yet again they play games with scale and timeframes to make a point that is not correct. For example, it looks like overdraft fees may have risen faster than transactions, but that is because the overdraft fee revenue chart goes back to 1992 and the transaction chart only goes back to 2000.

If we look at both from 2000, we see overdraft fees on debit cards have gone from $20 billion to $38 billion today, or about a 90% increase. At the same time, dollar amount of purchases on debit cards went from $0.3 trillion to $1.3 trillion (as well as I can read the graph) or an increase of 333%. I understand that there may be a mix shift I am missing – the overdraft numbers include charges for checks as well as NSF fees, but the article does not have the changing mix. This is another topic, but why can’t reporters even at the Times include all the numbers you really need to analyze this stuff – don’t they try to do these calculations? They have graphs side by side, implying one should compare trends, but they have apples (debit card transaction volume) next to oranges (all overdraft charges, including debit cards but other stuff too) on completely different time scales.

Anyway, by the article’s own numbers, the overdraft fee volume has grown 3.5 times slower than transactions, meaning that overdraft fees have dropped from 6.7% to 2.9% of debit card transactions. This shift may be less dramatic if there are mix changes in the fees, but never-the-less, why isn’t this good news? The world is never going to make the price of carelessness=0, if for no other reason that the moral hazard would be so large. But the high price on carelessness in this case seems to be reducing the frequency of people being careless (if the price of an overdraft has really gone up as implied anecdotally in the story, then the frequency must be way down — sure missed that data in the article). We want to raise the price of Co2 to produce less of it – why don’t we applaud when we raise the price of carelessness and we get less of it?

Most licensing efforts are nominally sold based on some public or consumer good but almost always end up being mostly about protecting politically connected incumbent businesses against new competitors.   Nowhere is this more obvious than in liquor licensing.

If you want to start a new liquor-based business (restaurant or bar) in Phoenix, it is going to cost you a hundred grand just for the license.

In fact, the sales price for existing licenses has dropped in recent years, with prices for a bar license in the Phoenix area slipping from $100,000 to $85,000 or $90,000, he said.

And these are the numbers with record-low demand.  Why does Arizona (or most other states) limit the number of licenses at all?  Why not just issue them to all comers, and let the market sort out who is successful and who is not?  Certainly we would likely see a lot more interesting restaurant startups if there was not an effective $100,000 tax on starting a restaurant imposed by the state.

State officials used to pretend the reason was to protect the community from being overrun by, er, dining choices or bars or whatever, but nowadays they don’t even bother with such justifications and just give the true reason – they are protecting incumbents from competition.

Arizona hadn’t awarded licenses since the late 1980s before the 2005 law passed. That was largely because holders of existing licenses didn’t want to diminish their resale value.

Well, I am a holder of several existing Arizona licenses and I say — open the floodgates!

Today’s issue in Arizona:  Should our public utility be required to provide line extensions to new homes “for free” (meaning paid for by existing rate payers) or should homebuilders, developers, and home buyers have to pay the real marginal cost of their utility infrastructure.

It is another of those subsidy issues where “visible” jobs (ie jobs in new home construction) are held out as justification, while “invisible job losses (ie from higher electricity rates to existing customers) are not even mentioned.

One of the biggest sticking points in the case is whether it is fairer to charge new developments the cost of new lines or simply charge the existing 1.1 million APS customers higher monthly rates to fund free lines.

Proponents of free lines said it would only cost customers 80 cents a month for APS to reinstate free lines, but APS officials said that if growth picks up as the economy recovers, customers could be charged an average of $45 a year to fund free lines.

Why is this even a point of discussion?  A small group of people are attempting to make the majority buy them some goodies. The argument, as always, is that when the price of these goodies is spread across lots of people, its not really very much per person.  It is almost as if the rest of us are being made to feel churlish for not agreeing to fund their next housing development.

I am far, far, far from being an anti-growth guy.  But I agree with the anti-growth guys in one respect – it is perfectly reasonable for new developments to pay for the full incremental infrastructure cost of their development.

Obama is offering broadband companies billions of dollars in other peoples money.  However, with a number of high profile examples out there of the control the Administration intends to extract in exchange for the money, the companies are probably are going to turn the money down.

Good.  I wish the government would place ridiculously onerous terms on all its farm and industrial subsidies so that everyone would turn the money down.