Wednesday, August 31, 2011

More War on Home Business

There are two ways a person can go into business, and that is either providing a good or providing a service. Based on two laws, the Food Safety Modernization Act and the Consumer Product Safety Improvement Act, it is potentially impossible for an individual to sell a product as a means of earning a living.

But there is no consistent regulation of providing services instead. The Institute for Justice has detailed many instances of local regulation regarding taxi service, interior decorating, or hair cutting. One area that has been ignored until now has been house cleaning or babysitting.

The state of California is now making an inroad on this means of augmenting a family budget - it has introduced Assembly Bill 889 that covers "persons who engage in specific types of domestic service." It leaves out those who provide health care through various state programs.

There are exemptions from those covered in the proposed law. Those under 18 are not covered by it, and family members who provide those services are not covered by it. This will not impact the income bondage of teenagers forbidden from earning a real living since it is unlikely they would ever earn much through babysitting, and so they are exempted. The bill requires extensive record keeping and benefits to accompany domestic employment and the fines are per violation per day so can quickly add up.

This will not impact the wealthy who hire domestic help, as they are capable of affording the paperwork that the bill demands. But a maid who works for several different middle class clients will find those clients have a hard time keeping up with the paperwork. It also creates a disincentive to do this without paperwork on the grounds that only the employer is liable and the employee is not. Therefore it sets the scene for a domestic employee to be able to turn around and threaten to report the employer unless unreasonable demands are met. Finally those who depend on babysitters will have a harder time having their needs met.

It is obvious who will be hurt by it; all who make money from babysitting or house cleaning, and those who depend on the services but are not wealthy enough to afford the employee paperwork. Who will benefit from it though? The bill sponsor claims that it is to protect domestic laborers, many of who are poor, minority, and even illegal aliens. That is not a politically powerful group. Who actually benefits from it?

House cleaning services, babysitting services, and day cares all benefit on the financial side. It will drive out the independent operator as those in the middle class who would hire domestic help will be forced to contract with the agency that handles the paperwork. On the political side the government will definitely benefit from more and more people being employed instead of self-employed and thus easier to track and record in accord with the war on home based businesses.

Friday, August 26, 2011

Why Monetarism?

Although Monetarism, as an interventionist economic policy, clearly isn’t libertarian, people continue to consider it as such. The basic difference between Keynesian Economics and Monetarist Economics is that one favors fiscal policy while the other favors monetary policy as a way for the government to manage the economy through the manipulation of aggregate demand.

And yet many people do consider Monetarism to be more libertarian, to the point where if a spectrum is arranged Monetarism is listed as basically a midpoint between Keynesian and Capitalism.

Considering Keynesian Economics, a reason to consider it as such is because all Keynesians are both Monetarists and Progressives, they believe in both monetary policy and in regulation as ways to manage the economy. A textbook Keynesian is no closer and no farther from libertarian than any Monetarist.

So there is reason to make a spectrum. But why go so far as to insist that instead of being a midpoint between real Keynesian and libertarian Capitalism, Monetarism is so often wrongly lumped with Monetarism?

It would best be described by Rothbard’s Law. "people tend to specialize in what they are worst at. Henry George, for example, is great on everything but land, so therefore he writes about land 90% of the time. Friedman is great except on money, so he concentrates on money." Rothbard went farther to describe Friedman in even harsher terms, saying "And so, as we examine Milton Friedman’s credentials to be the leader of free-market economics, we arrive at the chilling conclusion that it is difficult to consider him a free-market economist at all."

Then perhaps there is one reason left why people would consider Monetarism to be libertarian in any respect. It is because the current center of United States politics is so far devolved towards the regulatory state, with the government enmeshed in so many aspects of the American economy that to embrace textbook Monetarism is to embrace a reduction in the government's role in the economy.

Unfortunately there is a lot of room between slightly decreasing the role of government and actual libertarianism. Being in favor of slightly less regulation, slightly less control, slightly less taxing and spending, does not make one a libertarian.

Saturday, August 20, 2011

And there goes the Power

The United States economy is crumbling. The Federal Reserve has a program of inflating the currency in an effort to stave off much needed deflation. Instead the stagnant wages of those outside government are being stretched farther and farther to cover rising costs of food and energy, two of the highest costs in a household budget yet also items underrated in the official inflation rate.

So what is the newest interesting activity by the government? A phony jobs project? A new subsidy that does more harm than good?

No, it is shutting down power plants and raising the cost of energy.

And with much of the nation in a heat wave, this could lead to rolling blackouts when people need their air conditioners most.

It is true that there is a rationalization, although not a justification, for this. Given that the law no longer is about providing a level playing field and is instead about begging favors and granting favors there is no reason that the government cannot waive any EPA regulations that force these closures. Moreover since the government wrote these rules there is no reason they cannot be rewritten to allow the plants to save open.

It is unlikely that this is done deliberately to hurt people. Instead it is more likely that this is an example of gross incompetence combined with tunnel vision on the part of EPA regulators.

Even so, it is simply an interesting detail in the greater picture of the decay of the United States.

Sunday, August 14, 2011

The Downfall Begins in Earnest

The economy has been in a state of flux ever since the recent debt showdown. Before the deal was made it was obvious that Keynesians would use the lack of a deal to describe any downturn that might have occurred had no deal been made. But there was no indication as to what Keynesians would blame for a downturn if a deal is been made.

A deal was made at the last minute. There were some attempts to blame the lateness of the deal, but those attempts fell rather flat. Then S&P downgraded the credit rating of the United States from AAA to AA+. As Lew Rockwell pointed out, this would not cause a crash unless people knew matters were much worse.

Are matters worse? A trip to the grocery store can answer that. Prices on food are going up. The official inflation rate is measured by a basket of goods that underrates the impact of food and energy. Those are the areas that are more important on the budget of the middle to lower classes. As Gonzalo Lira pointed out only some prices rise in an hyper-inflation. Food, energy, medicine all rise in price, while the price of everything else collapses.

The creditors of the United States did not view the increase in the debt limit, without any actual accompanying reforms, as a financially sound thing to do. The view was instead that the Unites States continued to live beyond its means.

Food prices are rising. This is obvious to anyone who actually have to consider the price of food. Utility prices are trending upwards as well. The cost of health care is in an even greater state of uncertainty due to the phenomenon called “regime uncertainty.”

Although the decline has been going on for a long time, and the point of no return was passed a long time ago, the decline has started to accelerate to the point where the average person is beginning to notice. And they notice just as it has started to accelerate in earnest.

Saturday, August 06, 2011

Why the Budget Won’t be Cut

On a message board an experiment was tried. A very precisely worded question was posed to the members of this board.

Imagine you are in congress. Public pressure to cut the budget has grown so strong that the leadership of both parties has decided to actually at on it. Not with reductions of planned future increases, but with actual cuts. A special bi-partisan committee has been assembled, with the membership equally divided between the two parties. In order to keep argument to a minimum, the co-chairs have established one rule.

You can only suggest cuts to programs you support.

The theory is each party would support cutting the other party’s programs, and all it takes is one person to break ranks to get a majority in favor of cutting a program.

So, what program will you offer up to the chopping block?

It is a very difficult question for many people. The test was to see if Republicans would be willing to sacrifice any aspect of their many and multitudinous wars, or if Democrats would be willing to sacrifice any entitlement giveaway program. After all, the question was designed to eliminate any partisan cuts, cutting the programs of "the other guy."

The results were not encouraging. There was only one program that achieved any sort of consensus for cutting, and that was NASA. Strangely enough, both sides claimed it as one of the programs favored by "their side," and both sides were willing to put it on the chopping block.

There was no touching of the real budget eaters, the wars or Social Security and Medicare. Yes, every little bit helps, but the cuts that would help the most were left out.

When faced with a hypothetical scenario, partisans who aren’t elected to any office, with comments that would have no impact on the real world, were unwilling to admit that the real consumers of the budget should be cut. How much worse can it be for those in congress who will be voting on actual budgets and are locked in to special interests who forbid any cuts to their particular programs? If thinking people cannot even make hypothetical cuts, politicians cannot make any cuts.