Coyote Blog

Gary Johnson gave the finger to the Republican my-family-values-must-be-your-family-values set

Presidential candidate and former New Mexico Governor Gary Johnson charged today in a formal statement through his campaign that the Family Leader “pledge” Republican candidates for President are being asked to sign is “offensive to the principles of liberty and freedom on which this country was founded”.  Governor Johnson also plans to further state his position against the Family Leader pledge this afternoon in Las Vegas, NV at a speech he will deliver at the Conservative Leadership Conference.

Johnson went on to state that “the so-called ‘Marriage Vow” pledge that FAMILY LEADER is asking Republican candidates for President to sign attacks minority segments of our population and attempts to prevent and eliminate personal freedom.   This type of rhetoric is what gives Republicans a bad name.

“Government should not be involved in the bedrooms of consenting adults. I have always been a strong advocate of liberty and freedom from unnecessary government intervention into our lives. The freedoms that our forefathers fought for in this country are sacred and must be preserved. The Republican Party cannot be sidetracked into discussing these morally judgmental issues — such a discussion is simply wrongheaded. We need to maintain our position as the party of efficient government management and the watchdogs of the “public’s pocket book”.

“This ‘pledge’ is nothing short of a promise to discriminate against everyone who makes a personal choice that doesn’t fit into a particular definition of ‘virtue’.

Johnson is easily my favorite Presidential candidate in recent memory.

What does a statist government do when attaching “unexpected” to all negative economic numbers does not provide the necessary political cover?

Argentina’s government has filed criminal charges against the managers of an economic consulting firm, escalating its persecution of independent economists.

…The government is charging MyS Consultores with “publishing false information about inflation data” to benefit themselves and their clients. The criminal complaint alleges that MyS’s data also lead to speculative behavior in Argentina’s bond market.

…Consumer prices rose 9.7% in May from a year ago, according to the national statistics agency, Indec. But virtually all economists say annual inflation surpasses 20%—one of the world’s highest rates—angering government officials who dismiss inflation as a problem.

…So far this year, the Secretariat has fined at least nine economic research firms 500,000 pesos ($122,000) each. This week, the Secretariat also slapped a second fine on Orlando J Ferreres & Asociados.

“They fine us for saying how much prices have risen,” Mr. Ferreres, director of his eponymous firm, said. “They could seek criminal charges against all of us. We don’t know how far they’re willing to go.”

Mr. Ferreres said the legal actions are part of a strategy to prevent independent economists from publishing potentially negative information during an election year…

Government officials say they hoped the fines would deter economists from “deceiving” the public into making poor financial decisions by publishing inflation estimates that differ considerably from Indec’s consumer price index.

It is sad to see how far Argentina has fallen.  In the past it has been one of my favorite countries in the world to visit.

It happens all to seldom, for reasons I understand well.  Oil companies and Wal-Mart and other vilified private entities that are the object of populist and cynical political attacks very seldom fight back.  The reason is not because they are in the wrong, but because  the government has the power to gut them like a fish in a myriad of ways, and are populated by petty little thugs who love to dish it out but can seldom take any criticism.

That is why its great to see Koch Industries telling demagogues in the Democratic Party to take a hike.  For some bizarre reason, perhaps because the Left saw how much fun the Right had vilifying George Soros for everything, the Koch brothers are not the source of all imaginable plots and schemes.

Check out this letter, where Koch Industries responds to Democratic fundraising pitch.

Our rulers are pretty good at finding tricky ways to expand their power

…several environmental groups that have received millions in EPA grants regularly file suit against that same agency. A dozen green groups were responsible for more than 3,000 suits against the EPA and other government agencies over the past decade, according to a study by the Wyoming-based Budd-Falen Law Offices.

The EPA even tacitly encourages such suits, going so far as to pay for and promote a “Citizen’s Guide” that, among other things, explains how to sue the agency under “citizen suit” provisions in environmental laws. The guide’s author — the Environmental Law Institute — has received $9.9 million in EPA grants over the past decade.

And, to top it off, critics say the EPA often ends up paying the groups’ legal fees under the Equal Access to Justice Act.

“The EPA isn’t harmed by these suits,” said Jeffrey Holmstead, who was an EPA official during the Bush administration. “Often the suits involve things the EPA wants to do anyway. By inviting a lawsuit and then signing a consent decree, the agency gets legal cover from political heat.”

 

This was a pretty amazing article on cost savings experienced already by one school district in Wisconsin after the collective bargaining agreement with government unions was voided.

Of course, there have already been substantial cost-savings as more sane work rules have been put in place and employees have to pay a larger (but still trivial) share of their pension and health care premiums.

But I thought this bit of self-dealing by the unions was pretty amazing and is the type of thing that did not make the news back in the whole Wisconsin brouhaha

“The monetary part of it is not the entire issue,” says Arnoldussen, a political independent who won a spot on the board in a nonpartisan election. Indeed, some of the most important improvements in Kaukauna’s outlook are because of the new limits on collective bargaining.

In the past, Kaukauna’s agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust — a company created by the Wisconsin teachers union. “It was in the collective bargaining agreement that we could only negotiate with them,” says Arnoldussen. “Well, you know what happens when you can only negotiate with one vendor.” This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.

Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. “With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, ‘We can match the lowest bid,’” says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes. At least for the moment, Kaukauna is staying with WEA Trust, but saving substantial amounts of money.

This strikes me as an amazing example of self-dealing.  The union requires that their health care insurer get a monopoly, and then extract monopoly rents from the relationship.  You can be sure the union rank and file never saw a dime of these health care profits, which likely flowed to just a few union leaders plus the politicians who helped make it possible.

Bruce at Q&O has more

Standard disclaimer: I have no particular beef with unions per se, whose ability to organize workers is protected under the First Amendment’s right to assembly.  My problems related to unions are

1. Government rules that tilt the balance of power in negotiation to unions, require that all employees (in certain non-right-to-work states) join unions or at least pay dues, etc.
2. Public unions are a different animal than private sector unions and I have turned pretty strongly against these.  The problem in public sector unions is that there is no adversary — ie the politicians nominally negotiating with unions are often on the same side as the unions and cut horrible sweetheart deals that screw taxpayers.  Until we find a way to really represent taxpayers in public sector union negotiations as well as shareholders are represented in private sector negotiations, I tend to favor limits on public sector collective bargaining.

I have often described this statist feedback loop:

• Create government program
• Government programs messes up certain aspects of the market
• Blame such messes on “failure of markets” or capitalism or even the rich, rather than the government program
• Create new government program to fix problem created by last program
• Repeat

Obama’s new political strategy seems to be even more brazen

• Democrats pass new program over Republican objections
• New program has unseemly subsidies for rich people
• Blame subsidies on Republicans, to the point of using subsidies as example of bankruptcy of Republican party

Specifically, tax breaks for corporate jets:

The chief economic culprit of President Obama’s Wednesday press conference was undoubtedly “corporate jets.” He mentioned them on at least six occasions, each time offering their owners as an example of a group that should be paying more in taxes.

“I think it’s only fair to ask an oil company or a corporate jet owner that has done so well,” the president stated at one point, “to give up that tax break that no other business enjoys.”

But the corporate jet tax break to which Obama was referring – called “accelerated depreciation,” and a popular Democratic foil of late – was created by his own stimulus package.

Which is not to say that the losers in the Republican party would not likely have supported the same plan had it been their idea.

By the way, this is nearly exactly what Obama has been doing with those so-called special subsidies for oil companies.  This subsidies are in fact the identical tax breaks that all manufacturers receive that allow them to accelerate expensing of capital investment.  This is a tax policy that has enjoyed bipartisan support and no one is suggesting should be eliminated in general — just eliminated for industries that have bad PR.

I have written any number of times on the technocratic-statist urge to overturn emergent order that is created bottom up in favor of imposing their own top-down vision of how society should run.  The following is from David Mamet via Mathew Shaffer (hat tip Maggies Farm) and is a nice synopsis of this mindset

The problem is that “the Left today is essentially an elitist movement, and it has invested a lot of time and money in the idea that they know better.” Elites have been led to think “by getting the grades, and getting into good schools and think-tanks and government positions that they are fit” to reorder society more rationally. But this requires first demolishing the order produced by the organic processes of tradition, democracy, and markets — the culture. Why are some so susceptible to this fatal conceit? “They get out of elite schools being told nothing but, ‘You’re the best.’” Hubris — a dramatist’s area of expertise.

More good stuff, from the same interview

“There is no secret knowledge. The Federal Government is really the zoning board writ large,” he writes. What does that mean? He explains to me: “Mark Twain famously said, ‘God made the Idiot for practice, and then He made the School Board.’ The zoning board is like that — they’re just a bunch of people with power. Some are good, some are bad. But they gotta be watched like hawks, because power corrupts.” So “secret knowledge” is a Hayekian insight wrapped up like a Talmudic paradox. The secret is there is no secret — no special caste has the knowledge or goodness, inaccessible to the rest of us, to order society. Hence Mamet’s skepticism of technocracy and his preference for order created from the democratic and disaggregated processes of the marketplace.

And here is one more nice quote from Mamet, a while ago in the Village Voice

in the abstract, we may envision an Olympian perfection of perfect beings in Washington doing the business of their employers, the people, but any of us who has ever been at a zoning meeting with our property at stake is aware of the urge to cut through all the pernicious bullshit and go straight to firearms.

Kevin Drum seems upset that the US Government does not mandate paid time off for all US workers

The map below shows this starkly: the United States is virtually alone in not mandating any annual time off for employees, right along with such economic luminaries as Burma, Guyana, and Nepal. More charts on American overwork here.

I could take the same map and make this statement: “unlike such freedom-loving luminaries as Iran, Russia, Mali, and Chad, the United States government does not interfere in private decisions about vacation pay policies.”

By the way, why is it for statists that the lack of a government mandate for something desirable is considered equivalent to the desirable policy being non-existent?  In fact, Kevin Drum himself says his employer has a good paid leave policy.  Wow, how could such a thing have happened without a government mandate?

The PJ Tatler has this bit on the arming of government bureaucrats:

Quin Hillyer discusses the increasing armed firepower of the federal government.  Most people expect agencies like the FBI to be well armed for law enforcement purposes.  But the Railroad Retirement Board?  He reports that federal agencies far and wide now have armed agents, including the Small Business Administration.  For what?  To scare away phony 8(a) applications??  The United States Department of Education bought 27 Remington Model 870 12-gauge shotguns last year

I have no insight into what is going on in these particular agencies.  But I can comment on another agency.  Nearly every state parks organization has seen a proliferation of law enforcement titles among its employees.  Seemingly every field employee nowadays needs to have a gun and a badge.  Why?

Well, there are those who say that this arms race is necessary to keep the parks safe against some mythical crime wave.  But I can say with some authority, since our company runs over 150 public parks across the country, that with very, very few exceptions, parks don’t need this kind of on-site law enforcement support.  Most problems can be handled with on-site customer service employees, with the occasional call the the sheriff if things get rough.  In fact, customer service is actually improved without all the badges around.  Rangers with law enforcement credentials tend to solve issues with their visitors by issuing citations.  This is awful customer service — I am sure McDonald’s doesn’t like it if someone messes up the bathroom or parks across two parking spaces, but you won’t see them issuing citations to their customers.

The reason for this proliferation of law enforcement titles in parks is not demand for order, but incentives among employees.  In most states, getting a law enforcement title in a parks organization gives one an automatic raise, participation in the far-more-lucrative state law enforcement pension plan, and training that can be valuable when one leaves the parks organization.  Also, for some, it carries non-monetary benefits — some folks think its cool to wield a gun and a badge.

My column this week in Forbes is about the declining rate of entrepreneurship and startups in the US.

A recent study by the Beauru of Labor Statistics confirmed a potentially disturbing trend — that the number of new startup businesses in the United States has declined since 2006, and the number of jobs created by those startups has been in decline for over a decade.

This is not just a result of the recent recession.  These declines pre-date the current recession, and besides, startup activity has always held up well in past recessions as unemployed workers try entrepreneurship as a path back to prosperity.

There are likely a myriad of economic and demographic reasons for this decline, but certainly the growth of government power in the economy must be seen as a major contributor.  Government intervention in commerce nearly always favors large companies over small, even if that was not its specific intent, for a couple of reasons:

1. Increasingly complex and pervasive regulations on everything from labor practices to salt content tend to add a compliance cost burden that is more easily born by larger companies
2. Large, entrenched competitors are becoming more facile at manipulating government to create barriers to competition from upstart companies with different business models.

The role of government in throttling entrepreneurship has been evident for years, in the enormous differentials between US and European business startup rates.  Historically, the US has had entrepeneurship rates 3-4 times higher than in the large European industrial countries, due in large part to the barriers these latter countries place in the way of business creation.  But the US, with its current bi-partisan drive towards a corporate state, may soon be engaged in a race to the bottom with these other countries.

I go on to discuss each of these two points in more depth.

About 20 years ago I did a rail transit study for McKinsey & Company with a number of European state rail companies, like the SNCF in France.   With my American expectations, I was shocked to see how overstaffed these companies were.  At the time, the SNCF had more freight car maintenance personnel than they had freight cars.  This meant that they could assign a dedicated maintenance person to every car and still get rid of some people.

Later in my consulting career, I worked for Pemex in Mexico, where the over-staffing was even more incredible.  I realized that in countries like France and Mexico, state-run corporations were first and foremost employment vehicles run for the benefit of employees, and, as  distant second, value-delivery vehicles and productive enterprises.

Over the last 20 years, I have seen more and more of this approach to public agencies coming to the US.  If nothing else, the whole Wisconsin brouhaha hopefully opened the eyes of many Americans to the fact that public officials and heads of agencies feel a lot more loyalty to their employees than they do to taxpayers.

I see this all the time in my business, which is private operation of certain state-run activities (e.g. parks and recreation).  I constantly find myself in the midst of arguments that make no sense against privatization.   I finally realized that the reason for this is that they were reluctant to voice the real reason for opposition — that I would get the job done paying people less money.  This is totally true — I actually hire more people to staff the parks than the government does, but I don’t pay folks $65,000 a year plus benefits and a pension to clean the bathrooms, and I don’t pay them when the park is closed and there is not work to do.  I finally had one person in California State Parks be honest with me — she said that the employees position was that they would rather see the parks close than run without government workers.

Of course, if this argument was made clear in public, that the reason for rising taxes and closing parks was to support pay and benefits of government employees, there might be a fight.  So the true facts need to be buried.  Like in this example from the Portland transit system, via the anti-planner.

In 2003, TriMet persuaded the Oregon legislature to allow it to increase the tax by 0.01 percent per year for ten years, starting in 2005. In 2009, TriMet went back and convinced the legislature to allow it to continue increasing the tax by 0.01 percent per year for another 10 years. Thus, the tax now stands at $69.18 per $10,000 in payroll, and will rise to $82.18 per $10,000 in 2025.

At the time, TriMet promised that all of this tax increase would be dedicated to increasing service, and as of 2010, TriMet CFO Beth deHamel claims this is being done. But according to John Charles of the Cascade Policy Institute, that’s not what is happening.

Poring over TriMet budgets and records, Charles found that, from 2004 (before the tax was first increased) and 2010, total payroll tax collections grew by 34 percent, more than a third of which was due to the tax increase. Thanks to fare increases, fares also grew by 68 percent, so overall operating income grew by about 50 percent, of which about 7 percent (almost $20 million) was due to the increased payroll tax.

So service must have grown by about 7 percent, right? Wrong. Due to service cuts made last September, says Charles, TriMet is now providing about 14 percent fewer vehicle miles and 12 percent fewer vehicle hours of transit service than it provided in 2004 (comparing December 2004 with December 2010). TriMet blamed the service cuts on the economy, but its 50 percent increase in revenues belie that explanation.

By 2030, according to TriMet’s financial forecast (not available on line), the agency will have collected $1.63 billion more payroll taxes thanks to the tax increase. Yet the agency itself projects that hours and miles of service in 2030 will be slightly less than in 2004.

Where did all the money go if not into service increases? Charles says some of it went into employee benefits. TriMet has the highest ratio of employee benefits to payroll of any transit agency. At latest report, it actually spends about 50 percent more on benefits than on pay, and is the only major transit agency in the country to spend more on benefits than pay. This doesn’t count the unfunded health care liabilities; by 2030, TriMet health care benefits alone are projected to be more than its payroll.

From a commenter at Instapundit

It seems to me that whenever there is a threat of a government shutdown, it’s portrayed as just this side of a tsunami-level disaster. When government workers – teachers, sanitation workers, etc – go on strike, it’s portrayed as the middle-class worker sticking up for himself. Why is it that a government shut-down caused by a desire to spend less money is different than a government shutdown caused by workers failing to do their jobs – isn’t the effect the same?

Its been a long day here.  As many of your know, my company privately operates public recreation facilities.  We operate nearly 150 campgrounds and other parks on US Forest Service land, helping to reduce the cost of these facilities and keep them open despite declining budgets.

Because we pay all the expenses for the campgrounds and do not accept any government money (we operate solely using the gate fees paid by visitors), keeping these facilities open is not at all dependent on government appropriations.  As such, the facilities we operate have never been subject to closure in past government shut downs.  The Grand Canyon has to close because it is operated with government employees, but the public recreation areas we operate do not.

Or at least that was the position of the Forest Service until last night.  However, this morning, the USFS began to take the position we had to close, despite the fact that the law does not require it.  Through most of the day I have had to be on the phone pushing back against this bad idea.

At first, I thought it was some sort of scheme to purposefully make the cost of the shutdown worse, by shutting down public recreation facilities that did not need to be shut down.  However, I have come to understand that this is likely driven by a need for “consistency.”  Senior administration officials were concerned it would be confusing to the public if the National Park Service was totally closed but a substantial number of US Forest Service sites remained open.  I have spent a lot of time trying to convince folks that it was dumb to close literally thousands of the most popular recreation sites in the country merely in the name of mindless consistency.

Hopefully we will win the day, and we are starting to see some evidence the Forest Service will see it our way, and allow private operators who do not take Federal money or use Federal employees to remain open serving the public during the busy Easter week.

The importance of government largess to sports, including publicly-funded stadiums, has been a frequent topic on this blog.  Recently, the CEO of the Fiesta Bowl John Junker was fired for a number of alleged violations related to campaign contributions and favors for politicians.  This story is virtually inevitable.

The Fiesta Bowl benefits enormously from being one of the four BCS bowl games.  In fact, the difference economically between being one of the four BCS bowl games and being one of the numerous other bowls is roughly the difference between the United States and, say, Peru.   To give one a sense, the prize money for winning a BCS bowl is about $18 million.  The prize money for all other bowl games varies from $325,000 to, at most, $4.25 million.

But the Fiesta Bowl would almost certainly not be one of the four BCS bowls were it not for the city of Glendale building a half billion dollar stadium to be shared by our NFL franchise and the Fiesta Bowl.  It would almost be shocking if a few tens of thousands of dollars were not directed to politicians given the stakes on the table.  And it should be no surprise that politicians in Glendale received many of the payments.

Postscript:  Junker’s attorney’s comments are telling.  This was all about doing what it takes to make the Fiesta Bowl a big player.   And I can tell you, from all the grief I have gotten for defending a Constitutional principle at the expense of holding on to a sports franchise, there is a strong public lobby for the ends justifying the means when sports are involved.  Anyway, here is the quote:

While Junker declined SI.com’s request to be interviewed for this story, his lawyer, Stephen M. Dichter, could not resist issuing an e-mailed reminder that it was his client “who took the Fiesta Bowl from a postseason game created so [that] Frank Kush’s ASU Sun Devils would have a game in which they could be showcased while they and the rest of the WAC were completely ignored by the national media to its present position as one of the four pillars of the Bowl Championship Series.”

Obama budget director Jacob Lew, who wrote this lucid statement about the Social Security “Trust Fund” back in 2000

“These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures—but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits.” [bold added]

Needless to say, he has changed his tune now that he is being paid to shout “all is well” as enabler-in-chief of Obama’s spending habit.

So the Republicans in Wisconsin eliminated collective bargaining for public unions except on wages.  The Democratic Secretary of State, fully within the law, is delaying making the law official for 10 days.  This 10 days is giving us a great picture of the problem with public unions.

Why?  Because the 10 days was explicitly to allow cities and counties to cut new deals with unions, since all deals before the law is passed are grandfathered.  The fact that many city and county governments are rushing to take advantage of this window just proves that public collective bargaining is broken — no one is looking after the taxpayers.  I have argued that public unions are basically on the same side of the table with governments in bargaining sessions.  What could be better proof?  If government officials really cared about the taxpayer or their fiduciary responsibility, why in the world would they be rushing to cut above-market deals with government employees when they won’t have to do so in just 10 days?  Government officials are colluding with unions to race to transfer more wealth from taxpayers to workers before the window for such subsidies shuts.

Vermont Tiger raises a great point about the Volt:  (ht Maggies Farm)

The Volt comes with a manufacturer’s suggested retail price of $40,280 and a rebate from Uncle Sam of $7500. GM only plans to make 10,000 Volts this year; and there aren’t enough of them to go around. So, naturally, dealers are marking them up – some by much more than the retail amount. One Florida dealer is asking $65,590 (see Motor Trend for details). You might be able to get one on eBay for around $48,000 – after rebate that gets you right back to list price. Hmmm….

No car dealer or manufacturer would offer a rebate on a product that is in backorder status for the foreseeable future. But that’s exactly what your government is doing. Even if you believe that there is a compelling reason for the government to want us all to shift to partially electric cars, it’s clear that no incentive is required to sell all 10,000 cars available this year since people are buying them at markups which counteract the incentive. In this case the rebate dollars go to dealer margin. Note deficit cutting opportunity.

$75,000,000 down the drain to subsidize upper-middle-class people who want to make a statement about themselves.  Yet another public investment in the self-esteem of the wealthy and our rulers.  In ancient Rome they built coliseums.  In the middle ages they built cathedrals.   In communist countries they built giant statues of their leaders and tractor plants.  Today we subsidize quasi-electric cars and windmills.  None of it makes much sense as way to spend the average person’s money, but it makes the elite feel really, really good about themselves.  One wonders what the cumulative historic bill has been for ego maintenance of our rulers.

My new column, second in a series, is up at Forbes.  It is the second of a three-part series, and looks at incentives issues with Obamacare.  A few excerpts:

In the late 1960s, as part of the Great Society program, the US government constructed huge government housing complexes, with the goal of guaranteeing that everyone, no matter how poor, would have access to housing.  By the turn of the century, most of these complexes had succumbed to the wrecking ball  – the era of large public housing complexes was over.

Why?  Well, there were a lot of reasons the program failed, but a big one was faulty incentives.  By getting free housing, recipients had no “skin in the game,” no ownership, no financial participation in their housing.  As a result, many treated their taxpayer-funded abodes with contempt.  Why not?  They weren’t paying for it.  And if the property was in good shape at the end of the lease, they didn’t get any extra money.

I often compare Obamacare to the great failed public housing projects by warning folks that government health care is going to be much worse.    With the housing projects, we taxpayers paid large sums of money but only a few actually had to live in the horrible government apartments — at least most of us were able to keep our own homes.  With Obamacare, it is going to cost us even more money, and we are all going to have to move, figuratively, into the projects.

If we are all forced to have the same, low deductible, first-dollar health plans, what incentive is one going to have to stay out of the health care system, even for something minor?

I also talk about the incentive for drug development

Look around the world today — not one country with a government health care system pays drug reimbursement rates at a level that provides any incentive for new drug development.  In fact, almost all of the world’s health care R&D is paid for by Americans.  What happens when politicians, trying to close an exploding health care spending hole in the Federal budget, do exactly what every other country in the world has done and use their power to drive drug prices down to marginal cost?

In fact, to be confident that there will continue to be health care innovation in the future at all, one has to believe that the US Government will act completely differenlty in running its government health care system than does every other government in the world, despite the fact it will have the incentives to behave identically to all of them.  Is this a bet you feel good about?

Via Megan McArdle

A New York court ruled last month that all income earned by a New Canaan, Conn., couple is subject to New York state taxes because they own a summer home on Long Island they used only a few times a year. They have been hit with an additional tax bill of $1.06 million.Tax experts and real estate brokers say this ruling could boost the tax bill for thousands of business executives who own New York City apartments they use only occasionally. It could also hurt sales in the Hamptons and New York’s other vacation-home communities.

“People will think twice about spending any summer time in New York,” says Robert Willens, a New York-based tax consultant. “The amount of tax they could be subjected to is likely to outweigh the benefit.”…

Judge Joseph Pinto, a New York administrative law judge, made the novel ruling in a 2009 case that was affirmed last month on appeal by the New York state tax appeals tribunal. Mr. Pinto seized on what is meant by a permanent residence, which is the benchmark for whether all, or just the in-state portion, of an individual’s income is subject to New York state tax.

Mr. Pinto ruled that the couple’s Long Island vacation home qualifies under the law as a permanent abode because it was suitable for living year-round–whether or not the couple actually stayed in the home wasn’t relevant. Under the ruling, if an owner doesn’t spend a single a day in a home it could still count toward a permanent residence.

I didn’t really need a reason to not buy a home in the Hamptons, but just in case I were tempted, this would pretty much kill any such desire.  This, however, strikes me as one of those games (like trade wars) that New York has not thought out well before starting.  My admittedly uneducated guess from knowing some New Yorkers is that more New Yorkers own 2nd homes in Connecticut than vice versa.  If New York state is going to lose a tit for tat tax war if this is the case.

Chinese exceptionalism, or do we just notice it because it is so large.  I clicked through to this chart from a link on Instapundit that said to note how Chinese fertility fell off the map.  When I watched the video though, what I saw was ALL the fertility rates falling at roughly the same pace, at roughly the same point.  The lesson seems to be that fertility tends to drop with increasing mortality, wealth, and technology — which is what many of us have been saying in response to Paul Ehrlich for years.

I am probably over-reading this, but I am sensitive that there is a sort of storyline of Chinese exceptionalism — due to their taking some sort of totalitarian third way — that seems to be admired among certain US socialists and environmentalists and Thomas Friedman.  This hearkens back to all the admiration for the Japanese MITI-managed economy, right before their economy crashed for two decades or so.

China flourishes because it has a culture, never fully suppressed by Mao, whose people take well and quickly to capitalism — much of the development around Southeast Asia in previous decades was led by expat Chinese.  The totalitarianism that is, depressingly, so admired by the US intelligentsia is just going to lead China into the abyss.  Already we can see bubbles emerging due to the state’s forced mispricing of key economic inputs, from capital to oil.  The burden of spending on triumphalist projects like super-bridges and mega-buildings and Olympics and high speed trains is going to start appearing over the next few years.

Here is my prediction:  The Chinese are going to have a bubble burst that will rival any such economic explosion that we have seen in the last century.  I have been looking at the situation and by a number of metrics, the bubble is already huge.  I would bet against China, but the problem (as with all shorts) is timing.  Government officials, if they really dedicate themselves to the task, can extend bubbles for a long time.  Even in the US, which is less authritarian and more transparent, it can be argued that Fannie and Freddie and Barnie Frank and Alan Greenspan helped push off the reckoning by at least 5 years.   Of course, the longer you push it off, the worse it gets.  Which means the Chinese bubble is going to be a doozy.

Postscript: Here is a nice example — admiration from US environmentalists for China gutting their economy to make arbitrary goals

It’s interesting to note the dedication China has displaying in achieving its [energy efficency] target — shutting down entire operations and even executing rolling blackouts. Surely there would have been some amount of embarrassment for the nation on the world’s stage if it had missed its target, but that likely would have been minor. It’s worth noting the difference in political culture: What do you think would have happened if the US had such an energy-reduction target to hit, but a sagging economy got in the way?

I can tell you with some certainty: We would have missed that mark.

Will there never be an end to Americans who take advantage of our uniquely strong speech protections to laud totalitarians?

I find it hard to be surprised nowadays by how low trade policy can sink.  So I was depressed rather than surprised when I read this update on Magnesium trade.

Those of us who complain about protectionism often complain that its proponents mindlessly cite the seen (ie jobs lost to foreign competition) without taking into account the unseen (numerous consumers and consumer industries benefited by imports).  What I did not know is that this is not just bad economics, but is cemented into legislation:

In 2005, U.S. Magnesium Corporation, the sole producer of magnesium in the United States, succeeded in convincing the U.S. International Trade Commission and U.S. Commerce Department to impose duties on imports of magnesium from competitors in Russia and China. Before toasting this outcome with some clichéd or specious utterance about how the antidumping law ensures fair trade and a level playing field for U.S. producers, it is important to understand that downstream, consuming industries (those U.S. producers that require for their own production the raw materials and intermediate goods subject to the antidumping measures) have no legal standing in these cases. Statute forbids the U.S. International Trade Commission from considering their arguments or projections about the likely consequences of prospective duties. Statute requires that the ITC consider only the conditions of the petitioning industry.  In other words, the analysis is slanted.  The antidumping law codifies these evidentiary asymmetries, which makes it easier for U.S. suppliers to cut-off their U.S. customers’ access to alternative sources of supply.

In other words, in the case of magnesium, on the interests of the US Magnesium Corporation can be considered by the US Government in evaluating trade policy – the interest of the other 300 million of us is illegal even to mention.

This was also funny, from the government as Abbot and Costello files:

But on trade policy formulation, it seems that the right hand doesn’t always know what the left hand is doing. Last year, while magnesium imports from China were subject to U.S. antidumping duties, the Obama administration launched a WTO case against China for its restraints on exports of raw materials, including magnesium. That’s right. The U.S. government officially opposes China’s tax on exported magnesium because it imposes extra costs of U.S. consuming industries, but it insists on enforcing its own antidumping duties on magnesium imported from China despite those costs.

Amanda Carey via the Daily Caller:

Via Overlawyered:

As part of the Consumer Product Safety Improvement Act of 2008 (CPSIA), Congress mandated that the CPSC create a “publicly available consumer product safety information database” compiling consumer complaints about the safety of products. Last week, by a 3-2 majority, the commission voted to adopt regulations that have dismayed many in the business community by ensuring that the database will needlessly include a wide range of secondhand, false, unfounded or tactical reports. The Washington Times editorializes:

…[Under the regulations as adopted last week] anybody who wants to trash a product, for whatever reason, can do so. The commission can leave a complaint on the database indefinitely without investigating its merits “even if a manufacturer has already provided evidence the claim is inaccurate,” as noted by Carter Wood of the National Association of Manufacturers’ “Shopfloor” blog….

Trial lawyers pushing class-action suits could gin up hundreds of anonymous complaints, then point the jurors to those complaints at the “official” CPSC website as [support for] their theories that a product in question caused vast harm. “The agency does not appear to be concerned about fairness and does not care that unfounded complaints could damage the reputation of a company,” said [Commissioner Nancy] Nord.

Commissioners Nord and Anne Northup introduced an alternative proposal (PDF) aimed at making the contents of the database more reliable and accurate but were outvoted by the Democratic commission majority led by Chairman Inez Tenenbaum. Nord: “under the majority’s approach, the database will not differentiate between complaints entered by lawyers, competitors, labor unions and advocacy groups who may have their own reasons to ‘salt’ the database, from those of actual consumers with firsthand experience with a product.”

Any number of private actors have already tackled this problem. Amazon.com has probably the most comprehensive set of product reviews, and has taken a number of steps (e.g. real name reviews) to increase trust in their system.  Reviewers who are shills (either for or against a product) are quickly outed by other reviewers.   Another site whose reviews I rely on a lot is TripAdvisor, which has hotel and other travel reviews.   TripAdvisor allows the reviewed hotels to respond to individual reviews in a way that the consumer can see to get both sides of the story.

Apparently, none of this back and forth will be allowed in the CPSC data base.  The Democrats who wrote the process only want bad stuff in the data base, so it will not allow manufacturer responses or even positive reviews to appear.  The only possible justification for the government to run this database would be for the government to take a role in investigating and confirming or overturning claims and complaints, but it is clear it won’t be doing this either.   This will just be a location for disgruntled people to drop turds on various manufacturers, all with the imprimatur of the government.  I can’t see consumers finding much value here compared to the alternatives, but I can see the value in a courtroom to be able to stuff a government site with unsubstantiated claims and then use that site to say that the “official” government site is full of criticisms of the product.

Not sure this even requires comment.

Chandler’s new City Hall comes with some features that have municipal workers and visitors scratching their heads. Like the restroom signs that tell people not to drink out of the urinals and toilets.

…

A few employees have been cracking jokes and speculating about what it would take to make them slurp from potties when water fountains and sinks are a few feet away.

“I’m glad that I saw that sign because I was very thirsty and looking for a means to quench my thirst,” Mayor Boyd Dunn quipped. “Seriously, I’m certain there’s some regulation out there that requires that type of sign.”

From the New York Daily News, quoting VP Biden: (via Maggies Farm)

Every single great idea that has marked the 21st century, the 20th century and the 19th century has required government vision and government incentive

Wow, its hard to believe that even a hard core statist believes this in the face of historical evidence, but there it is.  The example  (and remember even a single correct example does not support the word “every”) is an interesting one:

“In the middle of the Civil War you had a guy named Lincoln paying people $16,000 for every 40 miles of track they laid across the continental United States. … No private enterprise would have done that for another 35 years.”

I am actually stunned that he is historically literate enough to get the second part of this right, that there was in fact a single transcontinental railroad, James J Hill’s Great Northern, that completed its line without government subsidies or land grants.  He even gets the date about right.  A few thoughts:

• Not mentioned by Biden is the emergence of the entire rest of the US railroad industry, which by 1860 had about 30,000 miles of track, mostly via private initiative.
• I think the original transcontinental railroad has interesting parallels to the Apollo program — certainly government action got us into space and a transcontinental railroad faster than private action, but it could be argued that both delayed private initiative in these areas longer than would have occurred without the action.
• For Lincoln in the Civil War, the transcontinental had as much to do with cementing Union control of California as it did promoting commerce or any other values

Here is my favorite fact — Every single transcontinental railroad went bankrupt at least once before 1925, except one.  Can you guess which one did not?  Yes, it was the Great Northern, the only one built entirely with private capital.

If I was an economics grad student, here is a study I would love to do.  Identify products or industries for which third-party payers, and particularly the government, contribute a substantial amount of the purchase volume, either from outright payments or loan guarantees.  Here are three biggies I can think of:

• Health care
• Houses
• College

Then look at the differing inflation rates over the last 20 years for these vs. a basket of other goods purchased the traditional way (ie with your own damn money).  I think you can see just from visual inspection where the answer is going to go.