Corporate Welfare in Illinois

Posted on October 7, 2019 | Comments Off on Corporate Welfare in Illinois

The state of Illinois is implementing a tax break for new cloud data storage centers located in the state. The Center Square’s Greg Bishop quotes me in a story about it:

A special carve out for data centers is bad policy, Competitive Enterprise Institute Senior Fellow Ryan Young.

“A principle of good policy is that the rules should apply to everyone, not just a select few,” Young said. “By that measure, Illinois’ tax break for cloud data centers is bad policy.”

Young said Illinois’ exemptions applies to one sector and is only available to large companies.

“The sales tax exemption requires a $250 million upfront capital investment, which more or less restricts it to the Googles, Amazons and Oracles of the world,” Young said. “None of these companies need the help.”

He said if the point of the tax break is to make Illinois a better place to do business, then why not apply it to everyone.

“This tax break is corporate welfare, plain and simple,” Young said.

“Given Illinois’ perilous fiscal situation, the state’s taxpayers would be better served if Springfield concentrated its efforts on reducing spending and deficits rather than doing favors for profitable businesses,” Young said.

Read the whole thing here.

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Posted in Economics, Media Appearances, Taxation, Uncategorized

This Week in Ridiculous Regulations

Posted on October 7, 2019 | Comments Off on This Week in Ridiculous Regulations

Non-impeachment news involved a major court ruling on net neutrality, plus a new tariff. This year’s Federal Register is on pace to surpass last year’s after a nearly 2,000-page week. Rulemaking agencies published new regulations ranging from modern swine slaughter to order forms for illegal drugs.

On to the data:

  • Last week, 97 new final regulations were published in the Federal Register, after 73 the previous week.
  • That’s the equivalent of a new regulation every one hour and 44 minutes.
  • Federal agencies have issued 2,292 final regulations in 2019. At that pace, there will be 2,969 new final regulations. Last year’s total was 3,367 regulations.
  • Last week, agencies published 501 notices, for a total of 16,699 in 2019. At that pace, there will be 21,631 new notices this year. Last year’s total was 21,656.
  • Last week, 1,937 new pages were added to the Federal Register, after 1,727 pages the previous week.
  • The 2019 Federal Register totals 53,302 pages. It is on pace for 69,045 pages. The 2018 total was 68,302 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Four such rules have been published this year. Five such rules were published in 2018.
  • The running cost tally for 2019’s economically significant regulations currently ranges from savings of $4.39 billion to $4.08 billion, mostly from estimated savings on federal spending. The 2018 total ranges from net costs of $220.1 million to $2.54 billion, depending on discount rates and other assumptions.
  • Agencies have published 57 final rules meeting the broader definition of “significant” so far this year. 2018’s total was 108 significant final rules.
  • So far in 2019, 388 new rules affect small businesses; 20 of them are classified as significant. 2018’s totals were 660 rules affecting small businesses, with 29 of them significant.

Highlights from last week’s new final regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

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Posted in regulation, Uncategorized

In the News: Minimum Wage

Posted on October 5, 2019 | Comments Off on In the News: Minimum Wage

Bethany Blankley has a writeup of my recent minimum wage study.

Reason‘s Eric Boehm also included a mention in a daily roundup.

The full paper is here.

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Posted in Economics, Media Appearances, Minimum Wage, Uncategorized

Richard L. Currier – Unbound: How Eight Technologies Made Us Human, Transformed Society, and Brought Our World to the Brink

Posted on October 4, 2019 | Comments Off on Richard L. Currier – Unbound: How Eight Technologies Made Us Human, Transformed Society, and Brought Our World to the Brink

Richard L. Currier – Unbound: How Eight Technologies Made Us Human, Transformed Society, and Brought Our World to the Brink

I hastily bought this book on sale thinking it was a yet another Schumpeter-inspired history of technology by an economist. I was pleasantly surprised to find it is written from an anthropologist’s perspective, and most of the book has little to do with economics or markets. Moreover, it is excellently done.

Currier has packed Unbound with evolutionary, biological, social, and behavioral insights into how technology has influenced the human condition, and vice versa. Causality’s arrow points in both directions, with massive implications for everything from our anatomy to gender roles, sexual behavior, and even our species’ geographic range. Bipedalism freed up our hands to use weapons and tools. The extra food provided calories for larger brains to use and improve these tools. Larger brains meant longer gestations and tougher childbirths, which effectively made hunting a men-only activity; this is the origin of gender roles that are unique to our species, though obviously this dynamic does not apply as it once did. To tease out these insights, Currier ranges all the way back to our Australopithecine and Homo habilis ancestors, as well as other primates such as chimpanzees and bonobos.

Among the other things the reader learns is that our species’ relative hairlessness was a direct result of our taming fire. This had obvious safety benefits, and I was probably not the only reader to have a Gary Larson-inspired chuckle at how this may have affected some of our more hirsute ancestors as natural selection did its work.

Chapters on tools, fire, clothing, and language give way to agriculture, transportation and eventually industrial production, around which point the book changes tone. By the 19th century or so the book begins to read less like an anthropology story and more like a history of business and technology, along the lines of Walter Isaacson’s The Innovators. The eighth and final technology is the emerging digital age, which is still maturing as we speak. Even at this early stage, Currier is correct about how the Internet, digitalization, and rapid globalization are having a transformative impact on par with the other great technologies.

There is another abrupt change in the final chapter, which is mostly paint-by-numbers hysterics over mass extinction and environmental apocalypse. This is alluded to in the book’s subtitle, though mostly absent until this point. Here, Currier shows that he has not often ventured outside his disciplinary home of anthropology. He would have benefited from an understanding of more diverse thinkers such as Julian Simon, Hans Rosling, Johan Norberg, Deirdre McCloskey, Matt Ridley, Steven Pinker, Joel Mokyr, Bjorn Lomborg, and other scholars from a range of disciplines from statistics to economic history to psychology, who are more adept in the study of progress.

Unlike the rest of an otherwise carefully written book, this final chapter reads like it was written in a single caffeinated cram session. Cautious words like “could” and “might” gradually morph into more certain proclamations such as “will” and “have” as the chapter proceeds. The very end also oddly mentions the 1930 Smoot-Hawley tariffs, but Currier correctly identifies tariffs as harmful policies, and his emotions carry him in favor of international openness and inclusion. At the very end, Currier suddenly goes through another mood swing and ends on an optimistic note about. Unlike just a few pages before, Currier now argues that dynamism and progress might forestall the coming environmental apocalypse after all. Before he can change his mind again, the book ends. In all, that odd journey reminded me of the occasional all-nighter I pulled back in undergrad trying to finish term papers on time.

Despite the weird rollercoaster ending, Unbound was one of my better reads of the year. It is almost like a wider-ranging sequel to Richard Wrangham’s excellent Catching Fire: How Cooking Made Us Human, which Currier cites liberally in his early chapter about fire. It also pairs well with Arthur Diamond’s Openness to Creative Destruction: Sustaining Innovative Dynamism, though that book’s Pollyanna-ish tone is a bit much even for this optimist.

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Posted in Books, History, Innovation, Technology, Uncategorized

James Buchanan Turns 100

Posted on October 3, 2019 | Comments Off on James Buchanan Turns 100

Don Boudreaux and Veronique de Rugy have an excellent tribute over at the American Institute for Economic Research.

And from the archives, here is a remembrance of Buchanan I wrote shortly after he passed away in 2013.

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Posted in Economics, Great Thinkers, Uncategorized

New $7.5 Billion Tariffs against European Union

Posted on October 3, 2019 | Comments Off on New $7.5 Billion Tariffs against European Union

The Trump administration has announced tariffs on $7.5 billion of goods from the European Union. This time, it is being done with the World Trade Organization’s blessing. Here is what is different about these tariffs—and what isn’t.

The EU gives subsidies to airplane manufacturer Airbus, giving it an unfair advantage over U.S.-based Boeing. So the U.S. filed a complaint with the WTO. The decision came down yesterday. As expected, it was in the U.S.’s favor, since corporate subsidies are fundamentally unfair. As part of the ruling, the U.S. is allowed to enact tariffs against up to $7.5 billion of EU goods to counteract the Airbus subsidies without violating WTO rules. This being the Trump administration, the new tariffs were announced within hours of the decision coming down. But just because you can do something doesn’t mean you should.

Aside from the usual economic objections to tariffs, the Trump administration’s strategy won’t work in a repeated-play setting. Because America’s relationship with the EU is longer than a one-time interaction, the new tariffs will soon do more harm than simply make some consumer goods more expensive.

Boeing gets subsidies of its own from the U.S. government, and the EU has its own WTO complaint pending about that. Corporate subsidies being fundamentally unfair, the EU will likely win. It will then likely have the option to put up its own additional tariffs against U.S. goods. If this next round of the repeat-play game plays out as expected, both Airbus and Boeing will continue to receive subsidies, same as before. Moreover, two new tariff increases will harm consumers and businesses on both sides of the Atlantic. At this point, the Trump administration’s latest tariffs will have caused double harm. Again, just because they can enact a new tariff doesn’t mean they should.

As has happened in almost every instance of the trade war so far, Trump’s opponents are using a tit-for-tat strategy. His tariff hikes are not met with the reforms he wants. They are responding in kind with their own tariff hikes. Trump’s tariff hikes reliably cost both Americans and our trading partners double.

Also worth noting—Airbus gets about 40 percent of its parts from the U.S. and has a factory in Mobile, Alabama. While all tariffs harm the country that enacts them, this one will cause more direct harm.

For more, see Iain Murray’s and my paper “Traders of the Lost Ark.” My recent paper on the Export-Import Bank, known around Washington as “Boeing’s Bank,” sheds some light on Boeing’s subsidies that may soon lead indirectly to yet more tariffs on U.S. businesses and consumers.

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Posted in Economics, International, Trade

Charles J. Halperin – Russia and the Golden Horde: The Mongol Impact on Medieval Russian History

Posted on October 3, 2019 | Comments Off on Charles J. Halperin – Russia and the Golden Horde: The Mongol Impact on Medieval Russian History

Charles J. Halperin – Russia and the Golden Horde: The Mongol Impact on Medieval Russian History

Halperin focuses more on the Russian side than on the Golden Horde. These Mongol descendants of Genghis and Batu Khan left behind comparatively few written sources, but Halperin still gives them plenty of attention.

The big picture periodization of this era of Russian and Central Asian history goes roughly like this: Russia had its first post-classical flowering in the Kievan Rus period, which lasted from roughly the 9th to 13th centuries. This came to an end with the 13th century Mongol invasions. After Genghis Khan, Mongol conquerors split into a number of different groups. The one that ruled over most of Russia from about 1240-1480 was called the Golden Horde. Other Mongol dynasties reigned in India (Mughal; note the resemblance to “Mongol”), Yuan China, which displaced the comparatively liberal Song dynasty; and much of the Middle East.

The Golden Horde ruled over Russia more than two centuries, surviving even the late-1300s wrath of Tamerlane attacking them from the south. They lasted until about 1480, when the tsarist government began to assert itself in earnest under Ivan III (his grandson was Ivan IV, better known as Ivan the Terrible). This 1240-1480 period is Halperin’s primary focus. There was not a single clean-line event when the Tatars ceded power to the tsars, which is why the periodization is not precise. The handover was a gradual process, and happened to different degrees and at different times in different places. Both cultures may well have been unaware of their trajectories at the time, which is a common theme in history.

Halperin shows a keen eye for how to interpret sources. One of the key concepts of written Russian sources of this period is the ideology of silence. Basically, there was a taboo among Russians against acknowledging that Mongols had ever conquered them. They used linguistic workarounds, which Halperin dissects, omitted important events only revealed by other sources, and emphasize smaller events and puff up minor victories.

One price of this was that they also had to downplay the big victories that eventually led to Russians shedding the Tatar yoke, which ordinarily would become the stuff of legend. This was apparently a price chroniclers were apparently willing to pay.

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Posted in Books, History

New Study: Minimum Wages Have Tradeoffs

Posted on October 2, 2019 | Comments Off on New Study: Minimum Wages Have Tradeoffs

Congress nearly increased the federal minimum wage from $7.25 to $15 per hour this year. Though the Raise the Wage Act is unlikely to pass the Senate, 29 states and numerous local governments have passed their own increases. Moreover, the next session of Congress will almost certainly reintroduce the bill. This issue will be alive for a long time to come. Though some workers would benefit from a higher minimum wage, this would only be at other workers’ expense. As I argue in a new paper, minimum wages have tradeoffs.

Moreover, tradeoffs go far beyond the usual complaints of job losses—of which the Congressional Budget Office estimates there would be 1.3 million if the Raise the Wage Act becomes law. The list includes, but is not limited to:

Differing regional impacts, layoffs, reduced non-wage compensation, a tax increase for low-income workers, fewer job openings, longer job searches, reduced hours, stricter policies for arriving late or leaving early, increased automation, higher insurance co-pays, less vacation and personal time, reduced or eliminated on-the-job perks, reduced employee discounts, less flexible hours, higher consumer prices, more outsourcing, higher youth unemployment, fewer minority workers hired, more abusive behavior by bosses, and higher crime rates.

Add them all up, and most economists believe minimum wages are likely a moderate net loss for low-income workers. For an ostensible poverty reduction policy, they are also poorly targeted. Minimum wage earners skew very young, often work part-time, especially if they’re over 25, and mostly live in households above the poverty level. Rather than causing all manner of tradeoffs and distortions by manipulating wages, a policy such as the Earned Income Tax Credit is far more likely to help the people it intends to, and with fewer tradeoffs.

Even assuming minimum wage increases meet the best-case scenario of being zero-sum, there are two ethical factors (beyond the money involved) that tip the scale against an increase. One is the rent-seeking minimum wages enable, and the other is reduced workplace flexibility for workers.

Rent-seeking: big companies including Walmart, Costco, and Amazon often have high internal minimum wages, and that’s great. What isn’t great is when those same companies lobby for legislators to impose higher minimum wages on their competitors. This can stack the deck against smaller businesses that can’t absorb the costs as easily. Worse, many people will actually believe and support the virtuous posturing hiding these rent-seeking grabs, making for a classic Baptists-and-bootleggers story.

Workplace Flexibility: Workers make more than wages. They also receive non-wage compensation ranging from tips to health insurance to employee discounts to free or discounted meals. These don’t always show up on a pay stub, but they still exist. One of the most common tradeoffs to a higher minimum wage is cuts to such non-wage pay. Total compensation doesn’t necessarily increase, it just gets shifted around—and taxed—in ways workers might not prefer.

When Washington, D.C. did away with the “tip credit” in its recent minimum wage increase, workers revolted and the City Council repealed the voter initiative just a few months after it passed. Most servers and bartenders would rather have high tips and a low wage than the package D.C. voters required them to take. Workers should be allowed to make those choices for themselves. Or think of someone who works at a music store or an electronics store in part for the employee discount. They might not like the job very much, but the discount helps to fund a hobby or a side business. For them, that non-wage perk makes the job worthwhile. A higher minimum wage might take that important benefit away.

For more, see my new paper “Minimum Wages Have Tradeoffs: Unintended Consequences of the Fight for 15.” For a shorter version, see the press release.

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Posted in Economics, Minimum Wage, Uncategorized

Robert Harris – Conspirata: A Novel of Ancient Rome

Posted on October 2, 2019 | Comments Off on Robert Harris – Conspirata: A Novel of Ancient Rome

Robert Harris – Conspirata: A Novel of Ancient Rome

The second volume of Harris’ trilogy of historical novels about Cicero. I read the first book, Imperium, many years ago at my former colleague Gene Healy’s recommendation, and greatly enjoyed it. Harris writes from the point of view of Tiro, a real-life figure who was Cicero’s slave. Tiro was Cicero’s secretary and despite his slave status, a trusted friend. One of his jobs was taking down Cicero’s many speeches and dictations, and he invented a form of shorthand still in use today so he could keep up with his master. Tiro invented the ampersand (“&”), the abbreviations “etc.” for et cetera and “e.g.” for exemplis grata (“for example” in English), and other common shortcuts. Harris’ choice of narrator is a good one.

Conspirata consists of two parts. The first covers the year of Cicero’s consulship, 63 B.C., and the Catiline conspiracy, which was a narrowly-foiled assassination plot by the Senator Catiline against Cicero. The second part covers the next several years, which involved the rise of Pompey, Caesar, and Crassus, the first Triumvirate. Roman politics divided into populist and aristocratic factions, called populares and optimates. Cicero was philosophically closer to the optimates, but as a self-made homo novo (“new man”) without a lengthy noble heritage, he was not fully accepted into their orbit. The book ends on a low note, with Cicero’s exile from Rome, thus setting things up for the third volume of the trilogy.

As with the previous book, the events are dramatized and not to be taken as literal history. But Harris has clearly done his research, and the personalities, settings, and events are authentic, and as far as I can tell he gets most things correct. The value in this book is two-fold—seeing events through Tiro’s eyes, who was both a participant and an observer, is quite a bit different perspective than the usual narrative history. Harris is also a fine novelist, and the book is intrinsically enjoyable, and gives a vivid picture of the times.

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Posted in Books, History, Literature, Uncategorized

Tim Alberta – American Carnage: On the Front Lines of the Republican Civil War and the Rise of President Trump

Posted on October 1, 2019 | Comments Off on Tim Alberta – American Carnage: On the Front Lines of the Republican Civil War and the Rise of President Trump

Tim Alberta – American Carnage: On the Front Lines of the Republican Civil War and the Rise of President Trump

Note: I wrote this review about a month ago, before Congress began an impeachment investigation against President Trump. I have left it unedited.

Alberta is a political correspondent for Politico. I read his book with Stephen Davies’ political realignment thesis in mind. According to Davies, people tend to align around two opposite poles in politics–but those poles tend to move around every few generations. For a lengthy period starting around the end of World War II, those two poles were capitalism and socialism. Now, with the Soviet Union almost 30 years gone, those poles have lost their relevance. Worldwide, political parties are realigning around new poles. This time around, it’s a nationalism-vs.-globalism axis.

This is apparent in the UK’s Brexit debate, and the election of populist leaders in Brazil, Italy, Mexico, and elsewhere. The process usually takes a couple of election cycles, and happens faster in some countries than in others. As Alberta’s book unintentionally shows, realignment is happening right now in America. It is also fairly far along, but not yet complete.

The GOP’s civil war is a referendum about President Trump on the surface. But the deeper philosophical split is one of nationalism against a more cosmopolitan worldview. The same fight is happening in the Democratic party, though without its own Trump-like figure to rally around or against, the struggle on the left side of the aisle is quieter. Alberta focuses almost exclusively on the GOP; a similar treatment of the Democratic Party’s realignment process would be a welcome addition to the literature.

The main fault with this book is that it is far longer than it needs to be. This is especially true of its 2016 campaign coverage, which feels as endless as the original campaign did. 2016 takes up about a third of a book that covers an entire decade. A fair amount of the campaign season slog in the book is essentially an ESPN-style highlight show of debate highlights, gaffes, and flash-in-the-pan candidates and personalities who were relevant for a few news cycles, but not particularly important for Alberta’s larger story arc.

Alberta convincingly shows, though again in more detail than necessary, that once Republicans choose a leader, they’ll follow him no matter what. This was apparent during George W. Bush’s presidency, when Republicans went along with Bush’s massive spending and entitlement increases and needless wars, and even the Keynesian bailout on which he collaborated with President Obama, who is otherwise mostly a two-minutes hate figure in the GOP.

Republicans’ pre-existing meekness has greatly amplified under Trump, almost to the point of becoming the party’s defining characteristic. He is strongly disliked inside his own party, but nobody in a position to is willing to put up meaningful opposition, whether to Trump’s spending and deficits, or his trade and immigration policies. They are just as meek about Trump’s intentionally divisive rhetoric, cozying up to dictators, and at times, outright racism.

Paul Ryan’s tragic career arc is the most prominent example, and Alberta tells it masterfully. Ryan’s choice of party over policy backfired, and ultimately led him to retire–though he was also put in an impossible situation. He became House Speaker with his party in mid-realignment. He also had a President foisted on him who is not temperamentally fit for the job, and has no philosophical commitment for or against Ryan’s policies, making him neither friend nor foe, despite their shared party membership.

Ryan’s story is is just one of many sad commentaries on party politics. Alberta shares savage assessments about Trump from some of Trump’s closest allies—many without the cover of anonymity. It is almost worse that Republicans are going along with Trump’s policies with their eyes open. They know better, and yet they continue to support Trump’s policies, values, and rhetoric. They have chosen to be this way.

Alberta’s story of weak Republican knees extends to the human weakness for a good us-vs.them narrative. People are eager to affirm their identity as part of a group, and are quick to vilify people outside it. This is why hard partisans are so eager to believe odd conspiracy theories, such as Barack Obama being born in Kenya, or Hillary Clinton running a prostitution ring from a pizza parlor—stories which Alberta tells in comic, yet tragic fashion. It also explains why President Trump’s base and party stick by him despite almost widespread misgivings about his character and his policies.

Adding Davies’ political realignment thesis on top of Alberta’s storytelling adds another level. The GOP’s reluctance to pursue limited government policies under Bush has become an active hostility to its Reagan-Goldwater tradition. People with an economist’s views on trade, immigration, and spending restraint used to be merely ignored. Now, they are actively sought as the enemy, to the point of Trump economic adviser Peter Navarro bizarrely comparing the Wall Street Journal to the communist China Daily. The GOP is still running on an us-vs.-them narrative, but the definition of “them” has changed. “Them” used to be socialists or people who prefer big government. Now “them” is seen in national, cultural, or racial terms.

The question is what will happen post-Trump. Both parties have strong populist elements. But in a two-party system there is likely only room for one strong populist party. Will that party be the Republicans or the Democrats? It’s too early to tell. The GOP base has eagerly embraced national populism, but most of the party establishment is playing along reluctantly. That support is also largely personality-based, and that personality will be gone from politics in either 2021 or 2025. The Democratic party is also divided, though the base-establishment split isn’t nearly as clean. They also lack a personality-cult figure to rally around. Much as I dislike horserace politics, how this one plays out over the next few cycles will be interesting to watch. About all we know for at this point is that there are very few good guys in this story, and they will all likely lose.

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Posted in Books, Elections, History, Political Animals, Uncategorized