Saturday, May 28, 2011

Indirect Subsidies

Sometimes the activities of the government can be truly mystifying when trying to understand. The whole subject of tobacco is one where nothing done makes sense. The product is both subsidized and taxed, subsidized so that the producers can make profits, and taxed to discourage people from the activity. The states simultaneously encourage people to quit smoking but depend on the tax monies generate from people smoking.

Moreover, in the 1990's, when lawsuits against tobacco companies by the states were popular as a way of recouping healthcare expenditures by the states, there were even more inexplicable complications. One company, subject to a lawsuit for the crime of selling a legal product to the citizens of a state, offered to stop selling the product in the state at all. The state responded by filing an injunction to force the company to conduct business while simultaneously suing them for conducting business.

The combination of supports to the activity and restrictions on the activity may seem puzzling, especially given the combination of subsidies and taxes. From an accounting point of view alone, removing both the subsidies and the taxes will result in savings through efficiency. The lack of subsidies will raise the price of tobacco to somewhere near the taxed price, but since the government isn't doling out money with one hand and collecting it with the other then there will be no transaction costs.

The reason this is not true though is because the layer of government that subsidizes the activity is not the same layer that taxes the activity.

In the federal system of the United States is that the states do not receive their income from the federal government but are instead responsible for their own budgets, their own revenue, and their own expenditures. Like any principle in modern government it is full out countless exceptions, most often in the form of directed funds for special projects, such as giving money for the construction of a community center. But unless there is a bailout of a state by the federal government, federal expenditures are not directed into the general fund of state revenues.

But if the federal government artificially lowers the price through subsidies, and the state government artificially raises the price through taxes, then the final effect is of the money being funneled through intermediaries to be received by the states. The consumer pays basically the same price, approximately, but a portion of that money is going to the states instead of to the farmer, and the federal government is paying the farmer so that the states can receive the money. So yes, the federal government does supply funds to the general revenue of the states, yet another way to prevent the states from gaining any ideas that they have any independence to stand up to the federal government when the federal government acts in an unconstitutional manner.

Thursday, May 19, 2011

Backdoor Forbiddance

One of the ways to know if a government is tyrannical is when the law places demands on the people to not own various goods. Many of these regimes will declare various items to be contraband or forbidden, such as subversive literature or the means of self defense.

There is actually very little in the way of economic interactions in the United States that are actively forbidden for purchase. The list is actually limited to various illegal drugs and, in most states, prostitution. Technically everything else is available for public ownership.

But that is not the whole of the interference in private transactions. There exists a whole second class of goods that can only be acquired with special permits, such as firearms and prescription medication. In order to own any of those goods it is necessary to get special permission from various authorities.

By manipulation of permission various levels of the government have been able to turn de jure legality into de facto forbiddance, such as with the Chicago handgun bans. Anyone in Chicago can own a gun if they have a permit, but nobody can get a permit. It was due to the technicality that guns were not actually forbidden that Chicago tried to defend their ban at the Supreme Court.

The most insidious method by which the United States government says that the people may not own various goods is not through saying that the people may not purchase or own goods, but by forbidding instead the sale or manufacture of those goods.

When the incandescent bulb ban goes into effect, it will be perfectly legal for anyone to own any bulbs already purchased. It will even be legal to buy those bulbs if a store actually has them to sell. What won’t be legal is for the store to sell them. The same is the situation with raw foods, especially raw milk. Anyone can own raw milk, and there are no laws against purchasing raw milk. But nobody can get permission to sell raw milk, and those who do are subject to harsh government action for peaceful, voluntary transactions.

It is even true selling rabbits, or when kids set up lemonade stands, or when people sell rides, flower arrangements, hair care, or interior design services. While it is legal for some people to sell these products, it is not legal for anyone to sell these completely legal products.

It is actually quite clever on the part of the United States government to ban only the production or sale and not the acquisition or ownership. Although the effect is the same in terms of what the people can own, it is not the people who are being restricted and thus the people are not aware of the laws limiting what they can own.

Friday, May 13, 2011

Rules for thee, not for me

It seems that many of the same organizations that supported the passage of Obamacare are also the organizations that have been
granted waivers to not be subjected to that legislation. It seems rather ironic, because if the people involved in those organizations really believed in the program then they would have no reason to ask for a waiver.

On the other hand, those groups that were not favorable to Obamacare are not being granted any waivers.

In a previous experiment in discussing healthcare reform it was shown that the point of healthcare reform was to force people in to it who didn’t want to be in it. The offer was made that those who oppose healthcare reform would be willing to fund it in exchange for not being part of it. The socialists argue that everyone needs to pay in to it in order for the program to work, so that was given to them. The socialists argue that government healthcare is better, so that was given to them. The price was that those who want a private system get a fully private system, private in every way. The offer was treated with horror.

The previous experiment proved that the whole point of healthcare reform was to force objectors in to a government run system. The current waivers show that the rule is intended only for those who do not want to be in it.

Such blatant hypocrisy can only be the result of a a truly authoritarian mindset where the rules are intended only and completely for political opponents. People are required to either support the ruler and get exemptions or suffer the consequences. By that standard, Obamacare is far more fascist than initially realized.

Saturday, May 07, 2011

Keynesian Economics and Regulation

It may seem rather odd to say this, but it is actually true that Keynesian Economists are not automatically advocates of the regulatory state. By definition, Keynesian economics is concerned with fiscal policy, using federal budgetary policy to moderate the economy. There is nothing about that which would indicate that a Keynesian must embrace regulation - it is theoretically possible to encounter a Keynesian who is only concerned about fiscal policy.

The reason it appears that Keynesians must be in favor of regulation and the attendant bureaucracy is because all Keynesians are. There is no economic activity they are content to leave alone.

The right-Keynesians and the left-Keynesians differ on who should be the beneficiary of the demand pushing government spending. Right-Keynesians would prefer to benefit the upper classes, leading to supply side economics as the outgrowth. Left-Keynesians prefer to benefit the lower classes, leading to demand side economics as the outgrowth.

The unnecessary (from a textbook point of view) embrace of the regulatory state has a similar division. Right-Keynesians prefer regulations that benefit the upper classes, leading to Mercantilism or Corporatism as the outgrowth. Left-Keynesians prefer to benefit the lower classes, leading to Progressivism as the outgrowth.

When cornered in a debate, it does happen occasionally that Keynesians will admit that regulation is not part of Keynes’ General Theory. Perhaps it would be more interesting to corner the Keynesian on that and try to force an admission about how far from Keynes’ writing they have gone in their embrace of regulation.