Economics

CBO Predicts a Hangover of Economic Proportions

By on 7.16.14 | 4:43PM

According to the CBO, the Clairvoyant Bureaucratic Office, “federal debt will be growing faster than GDP, a path that would be ultimately unsustainable.” Our national debt is already bigger than our economy.

The key source of upward pressure on the federal debt is expanded federal spending in the form of Obamacare, its gluttonous siblings Medicare and Medicaid, and its senile cousin Social Security. Because of government encroachment into the health care industry, health care spending will double over the next twenty-five years to 14 percent of GDP.

In order to stop the Social Security trust fund from defaulting and return to sustainable levels of unfunded liabilities by 2025, future and current Americans will have to incur a 25 percent cut in their benefits.

The CBO hearing had the tone of a doctor’s appointment for a self-destructive addict. The doctor says, “You know you can’t keep overspending like this, America,” and the government nods sheepishly and then scampers off to print more money.

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ThinkProgress Tries to Figure Out This Whole Minimum Wage Thing

By on 6.27.14 | 1:35PM

ThinkProgress would like you to know that Ikea will be raising its average minimum wage to $10.76 an hour for its American employees. The company has said it will calculate base pay by considering the cost of living at each of its store locations. In other words, Ikea’s goal is to provide a living wage. ThinkProgress helpfully points out that other companies have also raised their minimum pay recently, and that “these companies usually cite the same reason: they expect it to help them attract and retain better employees, which will help their bottom lines.”

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Comcast Isn’t the Free-Market Choice in the Internet Wars

By on 6.25.14 | 10:59AM

Free-market types have been rallying behind Comcast and against Netflix for some time now. For the sake of context, the debate is over whether Comcast should be able to "throttle" access to Netflix across its Internet service. Netflix, hosting streaming video, absorbs an incredible amount of broadband Internet access that can ostensibly stress Comcast’s infrastructure. Those of a more conspiratorial bent cite Comcast’s desire to protect traditional television from the Internet upstart as the reason behind throttling Netflix.

The aforementioned free-marketers have been using some variation of the argument that Comcast can do whatever it wants with its wires. Or interconnected tubes. Or whatever infrastructure provides the Internet. Further, Comcast should be free to price its service in any way it desires assuming the market can bear those prices.

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I’m Uber-Angry About Uber

By on 6.7.14 | 2:03PM

Yesterday, the Virginia Department of Motor Vehicles sent cease-and-desist letters to ride-sharing companies Uber and Lyft for not complying with state taxi regulations. Uber and Lyft continued to operate despite warnings in April that their for-hire business models defied state law.  

As a Virginia resident and satisfied Uber customer I would like to thank the Virginia DMV for protecting me from the dangers of affordable and convenient transportation.

No really, thanks.

Since its founding in 2009, Uber has been a success. Investors are so optimistic about Uber that it currently has a $17 billion valuation, a record for a technology startup in a direct investment round.

The Virginia DMV argues that it is only enforcing current taxi law, and they have a point. The real problem here is outdated and protectionist restrictions, not their enforcement.

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Student Loans, Student Debt, and Subsidies to Universities Should be Eliminated

By on 5.22.14 | 3:35PM

The Federalist has a thought-provoking piece on student loan debt today. Daniel Oliver believes the issue represents an incredible opportunity for the Republican Party. He argues that Republicans should endorse forgiving all student loan debt while at the same time eliminating all future student loan assistance programs. 

This is a big idea. Before you start shouting about personal responsibility, hear Oliver out:

Student debt is a public-policy issue that will keep on giving—giving problems to the Democrats, who created it, and the opportunity of a lifetime to Republicans, if they have the wit to seize it.

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Fannie and Freddie Learn Nothing From the Housing Crash

By on 5.14.14 | 3:59PM

Despite concerns in some quarters that we might be inflating another housing bubble, the government is apparently more worried about a slowdown in the housing market. In addition to John Berlau's piece, the Wall Street Journal has further news from everyone’s favorite spectacularly failed government lenders today, and it suggests we’ve learned absolutely nothing since the economic crash:

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Political Hay

Poor Winners in the GOP Establishment

By 5.13.14

Last week North Carolina House Speaker Thom Tillis escaped a runoff by earning 46 percent of the vote — six points above the threshold — in an eight-way primary race for the right to face down incumbent U.S. Senator Kay Hagan this November.

The post-victory squawking among Washington's smart set was that the GOP establishment has vanquished the Tea Party, that the Karl Rove and Mitt Romney wing of the party is ascendant once more. But this analysis, like most generated inside the Beltway, fundamentally misses the mark. For Republicans, it isn’t just wrong, but counterproductive.

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The Public Policy

Crony Capitalism Critics Claim the Moral High Ground

By 5.9.14

Thomas Piketty’s Capital in the Twenty-First Century moved the policy conversation onto a battleground that has traditionally favored the Left—inequality. Advocates of free enterprise were expected to object to Piketty’s premises and prescriptions, and they have: Why focus on relative outcomes rather than actual increases in living conditions for society’s less fortunate? 

But perhaps the Left didn’t expect that Utah Senator Mike Lee and others would seize on the same populist impulse that’s fueled interest in Piketty and take aim at the privileged and the powerful from a different direction. Instead of Piketty’s redistributionist agenda, these reformers are calling for an end to crony capitalism and more limits on a spendthrift government. 

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U.S. Taxes Drive International Deals

By on 4.28.14 | 3:11PM

Until fairly recently, most corporate takeovers (i.e. one company buying another) were done primarily for business development reasons, for economies of scale, for access to increased distribution, and/or because the target company seemed inexpensive to the acquirer (though sometimes an outsider would wonder just what value management of the buying firm thought they saw in the target).

More recently, while those factors remain important, another impetus for international M&A (mergers and acquisitions), specifically U.S. companies buying foreign companies, is for the U.S. company to be able to become a foreign-domiciled company to avoid the U.S.'s destructive corporate tax code which, unlike almost any other country's tax code, taxes income earned overseas.

Thus, part of American drug giant Pfizer's interest in British drug firm Astra Zeneca is because if a merger were to happen, Pfizer would legally turn itself into a British company (while maintaining headquarters in New York and listing on the New York Stock Exchange).

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Austerity Saves Great Britain

By on 4.24.14 | 3:37PM

All right, not quite. But knowing how much heartburn Paul Krugman will suffer if he reads that headline makes it worthwhile.

I’ve noted before how Britain’s supposed fiscal austerity is nothing of the sort, consisting of tax increases and mere cuts to the rate of spending. In 2013, British Chancellor of the Exchequer George Osborne decided to try real spending cuts for a change, sending Europe’s financial establishment into a tizzy. Now the results are in, and Francis Menton surveys them in a delicious blog post:

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