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| Courtesy of lovefromtheoven.com |
President Obama could learn a lot from this list of aphorisms (e.g., "do everything without complaining or arguing", "do it right the first time", and, of course, "talk less, listen more"). The same goes for members of Congress ("pick your battles, let go of the little things", "be patient and respectful", and, of course, "be thankful for all you have").
Quote of the Day
I slept and dreamt that life was Joy.
I woke and saw that life was Duty.
I acted, and behold, Duty was Joy.
Rabinranath Tagore
Rent-Seeking, Elizabeth Warren, and Henry George
Economist MJ Perry has one of his amusing markups of recent news stories, in which he bluntly translates passages in the context of free market principles. Domestic manufacturer Whirlpool (with a portfolio of well-known brand names also include Maytag, Amana, and Admiral) has roughly a 95% market share of premium-priced large residential washers (with freezers on the bottom). During recent Black Friday sales, two South Korean manufacturers (Samsung and LG, which also assemble units in Mexico) cut prices to up to 50%; Whirlpool, which elected not to respond to the price cuts, found that they lost market share and are accusing them of "dumping" washers and have lodged a trade protest. (Dumping is a dubious allegation; basically it asserts that foreign competitors are trying to drive domestic producers out of business by selling products below their own costs.) Whirlpool wants to raise import duties or taxes on these imported appliances 37%--and make no mistake: that means American consumers would be paying 37% more to protect Whirlpool's crony margins/profits and fill government coffers? Everyone wins except the consumer whom could use that 37% to save or spend for other purposes. (But note, of course, that South Korea would respond to such a provocation.)
Where do I stand on this? My thumb is so low that it's touching the ground. Will the Obama Administration ignore Whirlpool's request? Let's see how seriously it takes the new free trade pact with South Korea it FINALLY decided to support a few weeks back. But you can be sure if Whirlpool has any union employees, the Obama Administration will hear from them. However, if it really cares about middle-income people whom are trying to spend their limited discretionary dollars as efficiently at possible, why would it serve to protect the margins of a company which makes tactical mistakes in the marketplace?
In this case, Perry makes reference to "rent-seeking behavior" of a near-monopoly like Whirlpool. Adam Smith, the famous English free market theorist, divided income into 3 types: profit, labor, and rent. (Rent is a broad concept in economics, but let's just say that government policy can impede the pursuit of market-based profits and the windfall profits in these one-sided transactions, sometimes referred to as deadweight losses. Thus, for example, libertarians argue that because illegal drug transactions create an artificial scarcity, resulting in high prices, the windfall illegal profits or "rents" attracting (say) Latino drug lords or other criminal elements, and, of course, we spend a lot of public resources enforcing the prohibition in terms of police, prisons, etc., trying to protect Americans from their own bad choices.)
While I was writing this commentary, I was reviewing the Wikipedia rent-seeking article when this paragraph jumped out at me:
Rent-seeking behavior, in terms of land rent, figures in Georgist economic theory, where the value of land is largely attributed to provision of government services and infrastructure (e.g., road building, provision of public schools, maintenance of peace and order, etc.) and the community in general, rather than resulting from any action or contribution by the landowner.Does this sound familiar to the faithful reader? It should. Let's go back to August, when US Senate Democrat challenger to Senator Brown, Elizabeth Warren gave a speech:
You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.
There are several things wrong with what Ms. Warren says here, and you can review my relevant commentaries earlier this year. But let me point out first that government services are by their very nature monopolies, and taxpayers suffer their own deadweight losses. Second, no one is arguing whether companies should and do pay a share of the tax burden, but the issue is more of assessing taxes in a way that doesn't constitute an undue burden on economic activity (a distinction Warren ignores), such as Henry George's undeveloped land value tax. Adam Smith pointed out in the long run how the property tax is assessed is a wash to the capitalist in the sense he is only willing to pay a certain price for use of the property, however payments are split between the owner and the government.
There are certain aspects to Georgism which I find interesting but which Warren isn't considering here, because it's clear she's talking about DEVELOPED land value. For example, consider one of the oldest forms of wealth creation in real estate: buying property around a major city or prospective (intersecting) routes. One could argue that those property holders get a windfall profit by the very fact of public expenditures and/or authorizations: businesses would be attracted by the economic opportunities in newly developed suburbs or certain points along the routes or their intersections. I also think there is an argument to be made for revenue sharing in utilization of national natural resources.
Heading Down the Home Stretch in Iowa
We are already hearing gripes about PAC's (expect Obama to jawbone the same message as he did nearly 2 years ago in his unconscionable outburst aimed at the Supreme Court at the State of the Union address after the landmark Citizens United v FEC decision, which reversed an unconscionable double standard in the prohibition of corporate speech, despite its taxation). Gingrich is already sounding a populist theme, arguing Romney is trying to buy the election. I don't intend to defend Romney here; he can take care of himself. But Romney has already gone through the vetting process as a national candidate for two election cycles now; we have seen a long string of candidates (Cain to Bachmann to Perry to Cain to Gingrich and possibly to Santorum, not to mention Trump for a brief reign this past spring) whose only common attribute (other than not being a public sector executive) is NOT being Romney: Romney has fairly consistently drawn about 20-25% of support while other candidates have risen and fallen--based on scrutiny. Was it any surprise, for example, that the current kerfuffle on Ron Paul regarding racially insensitive comments from others in newsletters under Paul's name between 1988 through 1996 only came to the surface as it looked he was on the verge of becoming an upset winner in Iowa? The issue isn't so much negative ads: it's news reporters digging into candidates' pasts and trying to score points by putting candidates on the spot.
Romney's message has always been focusing on pro-growth business and economic policies. The issues about Gingrich (including his bipartisan ethics rebuke while Speaker, his past ties with Freddie Mac, his high unfavorables with voters and his former GOP House colleagues, his multiple marriages, etc.) were familiar to GOP voters even before he got his 15 minutes in the spotlight after Cain's candidacy collapsed. Certainly the things that the independent Romney PAC "Restore Our Future" is saying about Gingrich are already known; in fact, there are well-known reasons why Gingrich spent much of the year in single-digit percentage territory. (That Santorum, a 2-term Senator whom lost his reelection effort in 2006 to lackluster opponent, Bob Casey, by a mind-boggling 18 points, is gathering late momentum--mostly at the expense of Gingrich, is absolutely ludicrous. Santorum has no realistic shot at beating Obama.)
A lot depends on Tuesday's ground game; activists are usually extremely disciplined behind their candidates; the "more moderate" Hillary Clinton in 2008 found herself out-organized particularly in the caucus states. However, it does seem that a number of independent polls have repeatedly shown that Romney scores better against Obama than any other GOP candidate: to the GOP voter who doesn't want Obama reelected, that is by far the most important criterion. A PPP poll released today shows Paul with a 1-point lead over Romney and a 2-point lead over Santorum. First of all, that's basically within the margin of error (meaning the 3 candidates are in a virtual tie), but I don't believe most PPP polls. Second, I think Santorum's strength is overestimated, and he's been getting hit with his own share of conservative criticism (e.g., RedState): among other things, he was part of the earmark Congress, and he supported turncoat moderate GOP senator Arlen Specter over now conservative GOP Senator Toomey in a prior cycle.
Musical Interlude: Nostalgic/Instrumental Christmas
Note: this marks the end of my annual holiday music series. Tomorrow I'll resume with my favorite group series, starting with the rock band Styx.
Happy New Year Songs
ABBA, "Happy New Year"
Jose Feliciano, "Feliz Navidad" próspero año y felicidad
Alvin and the Chipmunks, "We Wish You a Merry Christmas" and a...
John Lennon, "Happy Christmas (War is Over)" "and a happy new year: let's hope it's a good one without any fear..."
