Thursday, June 30, 2011

LQ&C 6/30/11

- Former Hillsborough County Commissioner Kevin White's legal troubles stemmed from him trying to take bribes to bestow favors to those seeking sanction from the Public Transportation Commission. The Tampa Tribune advocated the Commission's abolition:

The panel, created by state law, allows public officials to pick winners and losers in the transportation business, which not only curtails free enterprise but also opens opportunities for favoritism, if not graft.

Those trying to start new vehicle-for-hire businesses say the PTC can be counted on to safeguard existing businesses. Last year after taxi companies complained, the board banished an electric vehicle service that provided free rides while making money from advertising.

Bravo. Say, who was that guy that told the Trib that misbehavior by Hillsborough County Commissioners was an inevitable result of government's power to control?

- The WSJ says there is a federal revenue problem, and it ain't because of the Bush tax cuts:

On May 12, the budget arm of Congress examined the changes in its baseline projections from 2001 through 2011. In 2001, it had predicted a surplus in 2011 of $889 billion. Instead, it expects a deficit of $1.4 trillion.

What explains that $2.29 trillion budget reversal? Well, the direct revenue loss from the combination of the 2001 and 2003 Bush tax cuts contributed roughly $216 billion, or only about 9.5% of the $2.29 trillion. And keep in mind that even this low figure is based on a static revenue model that assumes almost no gains from faster economic growth.

After the Bush investment tax cuts of 2003, tax revenues were $786 billion higher in 2007 ($2.568 trillion) than they were in 2003 ($1.782 trillion), the biggest four-year increase in U.S. history. So as flawed as it is, the current tax code with a top personal income tax rate of 35% is clearly capable of generating big revenue gains.

- A union official in Michigan put up a sign stating that any non-union/non-American made cars would be towed from the parking lot. Maybe it's understandable, given that the union members' jobs are dependent on the purchases of union/American made cars. Don Boudreaux offers some more foes to union employment:

The person who drives, say, a 1991 Buick Regal – whether he bought it new 20 years ago or bought it used yesterday – opts, no less than does the person who drives a 2011 Toyota Camry, not to buy a newly made American automobile. Both persons spend their money now in ways that keep demand for new American-made automobiles lower than it would otherwise be. The spending choices of the owner of the 1991 Buick harm your members no less than – and for exactly the same reasons as – do the spending choices of the owner of the 2011 Toyota.

Wednesday, June 22, 2011

The Right To Hire

The actions of the National Labor Relations Board (NLRB) that prevented the operation of an aircraft plant in South Carolina by Boeing were reprehensible. The fact that an agency of the federal government can tell a private company where it may conduct its operations - within the same country - is terrifying. The proponents of such actions have put at risk the livelihood of thousands of workers in South Carolina in a tough economic environment, and should disabuse themselves of the mantle of "liberal". Though the past century has bastardized this noble political tradition, this sad chapter of force of the many versus the few pushes the envelope to a whole new level.

Predictably, many conservatives were outraged. Wrote Rich Lowry at National Review Online:

H. L. Mencken defined puritanism as the haunting fear that someone, somewhere may be happy. The National Labor Relations Board is haunted by the fear that a company somewhere might be creating jobs with a nonunionized work force.

Boeing has run afoul of that fear by investing more than $1 billion in a new plant in the right-to-work state of South Carolina. With only the flimsiest legal justification, the board wants to force Boeing to reverse course and locate the facility with its current operations in Washington State, where its workers are unionized.

The NLRB’s claims are laughable on their face, although Boeing — trying to run a business in a highly competitive global market — can be forgiven for missing the joke. The board accuses Boeing of “interfering with, restraining, and coercing” its union employees in the exercise of their rights by making a thoroughly understandable business decision.

This is putting not a thumb, but a fist on the scale in favor of the unions. A writer at the liberal The New Republic says it “may be the most radical thing the Obama administration has done.” It’s an attempt to keep companies with the misfortune of operating in union-heavy states in perpetual thrall to organized labor.

Defenders of the free market were, and should be, aghast at the proposition that the government can tell you who you can and cannot employ. The right to hire and be hired should be counted among our most treasured liberties.

Unfortunately, most conservatives are in a poor position to champion this right. The fact that labor laws prevent Americans from hiring others across state borders often draws their ire. But when the same holds true across international borders, many of these same people voice their unqualified deference to the rule of law.

More open immigration is no more than the codification of the right to hire. The respect of this right may indeed mean the employment of laborers of lower wages (such as the workers in South Carolina) and changes in business patterns and culture.

Some such as I may view many of these changes as beneficial. But then again, I'm biased. One of my wife's parents emigrated from Mexico; my parents and I emigrated from New York. There may be those who disagree, but that gives them no right to restrict the actions of others through the force of government.

The right seeks to restrict hiring those from abroad, and the left seeks to restrict hiring in the Sun Belt. Neither can claim to defend employment freedom.

Wednesday, June 15, 2011

Debit Card Fees

One of the most prominent functions of the Dodd-Frank financial reform bill is that it limits the fees that banks can charge merchants for processing payments via debit cards. Essentially, every time you swipe your debit card at the store to pay for your purchase, that store has to pay a fee to the bank. The legislation limits the fees that banks can charge to a maximum of 12 cents.

Predictably, the St. Petersburg Times editorial page was in favor of this government interference in the business interactions of banks, retailers, and consumers:

Government intervention was needed because perverse incentives pushed the industry leaders, Visa and MasterCard, to raise swipe fees to entice banks to issue more debit cards. Yet merchants had little opportunity to resist the fee increases — other than refusing plastic altogether. As a result, swipe fees have tripled since 2001 even as technology has been bringing processing costs down.

While those fees brought in astronomical sums for Visa, MasterCard and the big banks, topping $20 billion last year, they hurt mom and pop merchants that operate on narrow margins. Consumers, too, felt the brunt of the fees in the form of higher prices.

The "mom and pop" meme has been pushed by proponents of the legislation, and it is complete nonsense.

Of course, these fees cut into the margins of small retailers. But the players with the clout to get the government to lower their bills for them are large retailers. It is anti-market, and anti-consumer.

The use of debit cards have opened up large swaths of the buying public to retailers. They allow for quick and easy payments of sales that are the lifeblood of retailers. If they don't like the costs of this option, then they can refuse it. Their reluctance to do so speaks to the value of debit cards to retailers.*

Secondly, the fee-restriction provision hurts consumers like, well, me. The presence of fees incentivized banks and retailers to act in my favor. My bank instituted a program that awarded me points for qualifying purchases on my card that I could redeem for rewards. My wife and I enjoyed a movie, popcorn and drinks for free thanks to such rewards.

We benefited from the retailers actions also. One of our favorite stores, Target, instituted a Target Debit Card which simply drafts money from our bank account like a check, without running our credit. All purchases on the card give the customer a 5% discount, as well as allowing us to donate 1% of the value of our purchases to the school of our choice. Target benefits by avoiding the debit card fee and fostering consumer loyalty.

After the legislation was passed, our bank cancelled the rewards program. Target has left its debit card product in place (for now), but it is unlikely it would have instituted it in the first place without the incentive the fees produced.

Misguided government action like Dodd-Frank is of course an unjustified intervention in the affairs of private sector parties. But it is also a tried and true way for those businesses in power to use their influence to transfer wealth from their customers to themselves.

*In some localities, it is illegal for merchants to charge an extra fee or put other restrictions on consumers using debit cards so as to offset the costs. These laws are garbage, but they should be thrown out, not countered by more regulatory heavy-handedness.