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Atlas Shrugs

August 3, 2015 in Economics

By Randall G. Holcombe

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Atlas Shrugs

August 3, 2015

Three months ago, the CEO of Gravity Payments, a Seattle credit card processing firm, announced that all of the firm’s employees would be paid a minimum of $70,000 a year. Now, the firm has fallen on hard times.

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Source: MISES INSTITUTE

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Dodd-Frank Is an Obstacle to Reform

August 3, 2015 in Economics

By Mark A. Calabria

Mark A. Calabria

July marked the fifth anniversary of passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Not surprisingly Washington celebrated with numerous events and Congressional hearings. I put in three Congressional testimonies myself, as well as numerous panel appearances, ranging in venues from the American Enterprise Institute to the Center for American Progress. One of the many impressions I walked away with is that badly needed substantial reforms of our financial system will be impossible to pass into law until we get past Dodd-Frank. I’ve also come to the conclusion that the only way to really get past it is full repeal.

One might ask, but wouldn’t repeal leave our system vulnerable and take us back to financial crises? And indeed that would be the crucial question, if its premise of Dodd-Frank having addressed the crisis were correct. Such a premise, however, is not correct. The weight of the evidence suggests to me that the recent crisis was driven largely by a boom and bust in our nation’s property markets, particularly housing, and that our current system of financial regulation linked the performance of the housing and mortgage market to our capital markets in such a manner as to result in a significant disruption when the value of housing and mortgages declined. Key ingredients of this crisis were: exceptionally loose monetary policy, supply rigidities in our property markets, extensive international capital flows into the US (and US mortgage market), extensive policy encouragements for both high corporate and household leverage and extensive moral hazard created by various government guarantees.

The Act did give a nod to crisis related issues like mortgage underwriting and the role of rating agencies, but for the most part, it did not address drivers of the crisis or addressed them in an ineffective manner. Of course the next crisis may look considerably different. The Volcker rule, for instance, was defended by Paul Volcker as not about the last crisis, but about the next one. Despite the almost tautological claim that every crisis is different, in truth a wealth of empirical data suggests crises have a lot in common. They almost always involve some combination of easy money, high leverage on property, moral hazard from government guarantees and international capital flows. These have largely been unaddressed in Dodd-Frank.

Some elements of Dodd-Frank may actually make financial crises worse. For instance concentrating derivatives risk into a few large entities …read more

Source: OP-EDS

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John Oliver Exposes the Disturbing Way Congress Governs Washington, DC

August 3, 2015 in Blogs

By Colin Gorenstein, Salon

The U.S. is the only democracy in the world that fails to give residents of its capital a vote in Congress.


The U.S. is currently the only democracy in the world that fails to give residents of its capital a vote in Congress. “Last Week Tonight” host John Oliver is hoping this will change ASAP.

Turning to the Revolution-era saying “no taxation without representation,” Oliver reminded Sunday viewers that tax-paying residents of District of Columbia have yet to feel this lived reality.

Even the Dalai Lama has gone on record saying this is “quite strange.” And that’s the Dalai Lama.

“It is not good when a guy from Tibet says, ‘Wow, this is really un-democratic,’” Oliver said. “Someone should do something about it. Does Richard Gere know about this? Someone should tell him.”

The “Last Week Tonight” host went on to explain that the District does have Congress representative Eleanor Holmes Norton, but she isn’t actually allowed to vote. It’s “pretend power — like a child watching ‘Dora the Explorer,’” Oliver said.

Watch the clip courtesy of HBO below:

 

 

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Source: ALTERNET

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Supreme Court: No More Lifetime Appointments

August 3, 2015 in Economics

By Doug Bandow

Doug Bandow

Democrats and Republicans alike have turned Supreme Court appointments into a partisan slugfest. No wonder: while the judiciary has long been described as the least dangerous branch of government, the court has become instead a continuing constitutional convention. Just five votes can turn the Constitution inside out.

The latest Supreme Court term was seen as a shift to the left. The high court rewrote Obamacare to save the president’s landmark legislation to socialize American health care and completed a social revolution by nationalizing gay marriage. These decisions set off a flurry of promises from Republican Party presidential candidates to confront the judiciary.

Extreme Measures

Jeb Bush said he would only appoint judges “with a proven record of judicial restraint,” even though previous presidents claiming to do the same chose Anthony Kennedy, David Souter, and John Roberts, among many other conservative disappointments.

Senator Ted Cruz (R-TX) called for judicial retention elections. Such a change at the federal level would require a constitutional amendment, though it would mimic the practices of some 20 states. Even more controversially, Cruz suggested that only those whose case was brought before the justices had to respect Supreme Court rulings.

Extreme measures seem necessary because a simultaneously progressive and activist judiciary has joined the legislature and executive in forthrightly making public policy.

It is necessary to find a way to impose accountability while preserving independence. Appointing judges to fixed terms would simultaneously achieve both objectives.”

Should Justices Serve for Life?

The influence of judges has been magnified by their relative immunity from political pressure. Although the courts sometimes follow the election returns, in many cases — such as abortion and gay marriage — judicial decisions have short-circuited normal political discourse.

That fact alone makes judicial appointments important. Their significance is magnified by judges’ life tenure.

Lose the battle over filling a Supreme Court slot and you may suffer the consequences for decades. Gerald Ford’s unelected presidency merits little more than a historical footnote, but his Supreme Court legacy long persisted through Justice John Paul Stevens, a judicial ideologue hostile to liberty in most forms. Republicans going back to Dwight Eisenhower publicly lamented the evolution of their appointees, and every one of them made at least one choice that ultimately advanced a big-government agenda. Anthony Kennedy and John Roberts fill that role today.

Lifetime tenure has other consequences. The appointment process is endlessly arbitrary, as judges hang on, irrespective of advancing age. Although …read more

Source: OP-EDS

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Paul Krugman: How the US Govt Can Prevent Financial Catastrophe in Puerto Rico

August 3, 2015 in Blogs

By Janet Allon, AlterNet

Puerto Rico has hit hard times, but, thanks to a safety net, is better off than Greece.


Anyone who pays attention to the news knows that Puerto Rico has hit some hard times. How bad? Not as bad as Greece, fortunately, thanks mostly to the fact that poor Puerto Ricans still benefit from the U.S.'s social safety net, Paul Krugman points out in Monday's column.

The island is a victim of a ”severe economic downturn,” Krugman writes, and the fact that its government, “was slow to adjust to the worsening fundamentals, papering over the problem with borrowing. And now it has hit the wall.”

At one point Puerto Rico was a manufacturing center and was boosted by a federal tax break, Krugman explains, but no more.

These days manufacturing favors either very-low-wage nations, or locations close to markets that can take advantage of short logistic chains to respond quickly to changing conditions. But Puerto Rico’s wages aren’t low by global standards. And its island location puts it at a disadvantage compared not just with the U.S. mainland but with places like the north of Mexico, from which goods can be quickly shipped by truck.

The situation is, unfortunately, exacerbated by the Jones Act, which requires that goods traveling between Puerto Rico and the mainland use U.S. ships, raising transportation costs even further.

Puerto Rico, then, is in the wrong place at the wrong time. But here’s the thing: while the island’s economy has declined sharply, its population, while hurting, hasn’t suffered anything like the catastrophes we see in Europe. Look, for example, at consumption per capita, which has fallen 30 percent in Greece but has actually continued to rise in Puerto Rico. Why have the human consequences of economic troubles been muted?

The main answer is that Puerto Rico is part of the U.S. fiscal union. When its economy faltered, its payments to Washington fell, but its receipts from Washington — Social Security, Medicare, Medicaid, and more — actually rose. So Puerto Rico automatically received aid on a scale beyond anything conceivable in Europe.

Some conservatives might argue that the U.S. is …read more

Source: ALTERNET

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Cecil Was a Bad Boy

August 3, 2015 in Economics

By Richard W. Rahn

Richard W. Rahn

“American, single-handedly, saves 600 African antelopes and 12 baby elephants — by killing a lion.” As you read the first part of the previous sentence, you most likely are thinking “this is a good guy.” But when you read the last part of the sentence — particularly if you are a cat lover — you may be thinking “this is a bad guy.”

Adult lions on average eat about 15 pounds of meat a day. In the wild, they feed primarily on medium-size animals, such as antelopes and occasional baby elephants. The late Cecil the lion, killed by the American dentist, was reported to be about 13 years old. Cecil probably killed and consumed roughly 70,000 pounds of meat during his life, which likely included many hundreds of antelopes and baby elephants.

When you see a wildlife movie where a lion is chasing an antelope, do you root for the lion or the antelope? Even if you are a cat lover, how many antelopes do you think should die to feed one lion?

In Northern Virginia where I live, whitetail deer are very plentiful — too plentiful, according to the wildlife biologists. So the county police and others kill deer from September to February by shooting them with guns or arrows. The local animal rights people are opposed to such deer “culling,” but seem to have no good answers as to how to control the deer population. The deer reproduce rapidly because their natural predators have been eliminated — and have only partially been replaced by the automobile. Each year, there are thousands of collisions between deer and automobiles. A few years ago, in a tragic accident, a local school librarian was killed when her car hit a deer. If we killed all of the deer, how many automobile accidents, including some human deaths, would be reduced? How many deer lives should be sacrificed to save one human life? Some may consider this to be a politically incorrect question, but biologists, economists, political leaders and others are forced to think about such questions. The statistics about deer populations and related auto accidents are quite robust, so the question is not academic.

People naturally do not like to think about such tradeoffs. The American dentist who killed the lion (and apparently did not realize that he was not in a legal hunt) has received death threats. If some of these death threats are …read more

Source: OP-EDS

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How Uber Threatens Our Way of Life

August 3, 2015 in Economics

By Per Bylund

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How Uber Threatens Our Way of Life

August 3, 2015

The online tech and science magazine Verge recently published an essay on the economic and political impact of disruptive ride-sharing startup Uber: Uber can’t be stopped. So what

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Source: MISES INSTITUTE