Coyote Blog

Name the field:  Housing, education, health care.  In most any industry you can name, the sum of the government's interventions tend to subsidize demand and restrict supply.  In health care for example, programs like Medicaid, Obamacare, Medicare, and others subsidize demand while physician licensing, long drug approvals and prescription requirements, certificates of need, etc restrict supply.

If you are wondering why, it turns out that most government regulatory processes are captured by current incumbents, who work to get the government to subsidize customers to buy their product or service while simultaneously having the government block upstart competitors, either foreign or domestic.  For example in housing, existing homeowners form a powerful lobby that limits housing supply through restrictive zoning while demanding that the government subsidize mortgage interest (as well as low-cost mortgage programs) and give special tax treatment to capital gains from homes.   The result in every industry is supply shortages and rising prices.

Yesterday, we saw another classic example.  Federal, state and local governments have spent billions of dollars over the last decades subsidizing solar panel installations in homes and businesses.  But now, they are also simultaneously restricting the supply of solar panels:

President Donald Trump is once again burnishing his protectionist bona fides by slapping imported solar cells and washing machines with 30% tariffs - his most significant action taking aim at the world's second-largest economy since he ordered an investigation into Chinese IP practices that could result in tariffs.

Acting on recommendations from US Trade Representative Robert Lighthizer, Trump imposed the sliding tariffs. Solar imports will face a 30% tarifffor the first year, then the tariff will decline to 15% by the fourth year.It also exempts the first 2.5 gigawatts of imported cells and modules, according to Bloomberg.

And... who would have guessed that Elon Musk would be on the receiving end of another government crony handout?  The patron saint of subsidy consumption will get yet another, as Tesla's solar city is currently building a large domestic panel manufacturing plant, an investment decision that makes little sense without tariff protection.

I can only guess that the article does a poor job of describing the plaintiffs' argument.  Because the argument that the pardon power impinges on the separation of powers, presumably because it voids a judicial ruling, would be true of any pardon in all of history.  The Constitution seems to be pretty open-ended in granting this power.  As much as it is heartening to see Democratic Congresspersons suddenly develop a concern about Constitutional limits on government power, this seems like a big waste of time and money.

A slate of congressional Democrats is asking a federal judge to invalidate former Sheriff Joe Arpaio's presidential pardon and move forward with sentencing.

Attorneys for 33 members of the U.S. House of Representatives aired their concerns in a "friend of the court" brief filed in federal court on Wednesday morning.

The brief argued that U.S. District Judge Susan Bolton should toss President Donald Trump's pardon of Arpaio, 85, in the interest of protecting the government's division of powers.

"The presidential pardon upon which that motion is based is an encroachment by the Executive on the independence of the Judiciary," the document stated. "The amici urge the Court to defend jealously against that encroachment as the framers intended."

The government does it in health care, education, and housing.  Usually in the name of increasing access to or usage of something, they will subsidize demand.  But then at the same time they will restrict supply, giving lie to this stated justification of increasing access, making the whole exercise a crony enrichment of a small number of incumbent producers or asset owners.  The government creates low income housing programs and subsidized mortgages but limits the ability to construct new homes, thus having the primary effect not of increasing housing access but of driving up home prices for current incumbent home owners.  In health care the government subsidizes access to care in any number of ways but then restricts supply through certificates of need, onerous licencing programs, and drug manufacturing restrictions.

Now, consider solar panels.  The government has many programs to subsidize the purchase of solar panels.  Often, one can get local, state, and federal rebates and tax breaks for buying solar panels.  But at the same time:

President Donald Trump’s pledge to offer American companies more aggressive protection from foreign competition got fresh ammunition Friday, when a government board cleared the way for him to deploy a long-dormant legal weapon to restrict solar panel imports....

In the solar panel case, filed by Georgia-based Suniva Inc. and joined by Oregon-based SolarWorld Americas Inc., the ITC commissioners will now consider specific policy recommendations and submit those to the White House by Nov. 13. Mr. Trump then has two months to decide whether to impose solar trade barriers....

“We brought this action because the U.S. solar manufacturing industry finds itself at the precipice of extinction at the hands of foreign market overcapacity,” Suniva said. The firm filed for bankruptcy protection earlier this year.

This really is utter madness, even from a domestic employment standpoint.  I would be willing to be that the solar panel installation industry, which will be hurt by rising costs of solar panels, employs way more people than the US panel manufacturing industry.  The solar industry's trade association seems to agree:

“Analysts say Suniva’s remedy proposal will double the price of solar, destroy two-thirds of demand, erode billions of dollars in investment and unnecessarily force 88,000 Americans to lose their jobs in 2018,” said the Solar Energy Industries Association, which promotes solar use.

For Progressives who are suspicious of public choice theory, this is they sort of prediction public choice theory makes and should be an area where Progressives and libertarians could make common cause.  But traditionally Progressives have always been trade restrictionists, which seems crazy to me.

Via Zero Hedge:

a group of 12 Democratic Congressman have signed a letter urging the Department of Justice and the Federal Trade Commission to conduct a more in-depth review of e-commerce giant Amazon.com Inc.'s plan to buy grocer Whole Foods Market Inc., according to Reuters.

Rumblings that Amazon is engaging in monopolistic business practices resurfaced last week when the top Democrat on the House antitrust subcommittee, David Civilline, voiced concerns about Amazon's $13.7 billion plan to buy Whole Foods Market and urged the House Judiciary Committee to hold a hearing to examine the deal's potential impact on consumers.

Making matters worse for the retailer, Reuters reported earlier this week that the FTC is investigating the company for allegedly misleading customers about its pricing discounts, citing a source close to the probe.

The letter is at least third troubling sign that lawmakers are turning against Amazon, even as President Donald Trump has promised to roll back regulations, presumably making it easier for megamergers like the AMZN-WFM tieup to proceed.

It is difficult even to communicate how much Amazon has improved my life.  I despise going to stores, and Amazon allows me the pick of the world's consumer products delivered to my home for free in 2 days.  I love it.  So of course, politicians now want to burn it down.

I say this because the anti-trust concerns over the Whole Foods merger have absolutely got to be a misdirection.  Whole Foods has a 1.7% share in groceries and Amazon a 0.8%.  Combined they would be the... 7th largest grocery retailer and barely 1/7 the size of market leader Wal-Mart, hardly an anti-trust issue.  So I can only guess that this anti-trust "concern" is merely a pretext for getting a little bit of press for attacking something that has been successful.

The actual letter is sort of hilarious, in it they say in part:

in the letter, the group of Democratic lawmakers – which includes rumored presidential hopeful Cory Booker, the junior senator from New Jersey – worried that the merger could negatively impact low-income communities. By putting other grocers out of business, the Amazon-backed WFM could worsen the problem of “food deserts,” areas where residents may have limited access to fresh groceries.  "While we do not oppose the merger at this time, we are concerned about what this merger could mean for African-American communities across the country already suffering from a lack of affordable healthy food choices from grocers," the letter said on Thursday.

Umm, the Amazon model is being freed from individual geographic locations so that everyone can be served regardless of where they live.  This strikes me as the opposite of "making food deserts worse."  It is possible that Amazon might not deliver everywhere at first, and is more likely to deliver to 90210 than to Compton in the first round of rollouts.  But either they do deliver to a poor neighborhood, and improve choices, or they don't, and thus have a null effect.  And it is really sort of hilarious worrying that new ownership of Whole Foods, of all groceries, is going to somehow devastate poor neighborhoods.

By the way, if I were an Amazon shareholder, I would be tempted to challenge Bezos on his ownership of the Washington Post.  In a free society, he is welcome to own such a business and have that paper take whatever editorial stands he wishes.  However, we do not live in a fully free society.  As shown in this story, politicians like to draw attention to themselves by using legislation and regulation to gut successful companies, particularly ones that tick them off personally.  In this case:

So far, it’s mostly Democrats who are urging the FTC to take “a closer look” at the deal. However, some suspect that Amazon founder Jeff Bezo’s ownership of the Washington Post – a media outlet that has published dozens of embarrassing stories insinuating that Trump and his compatriots colluded with Russia to help defeat Democrat Hillary Clinton – could hurt the company’s chances of successfully completing the merger, as its owner has earned the enmity of president Trump. Similar concerns have dogged CNN-owner Time Warner’s pending merger with telecoms giant AT&T.

As an example, from the WSJ today:

Auto executives typically spend the end of the year prepping for product debuts and thinking up ways to spark sales.

This time around, Detroit’s chiefs devoted considerable time to trying to figure out how to deal with the nation’s new commander in chief. Union bosses are being called in to consult on how to reshuffle factory work, board members are trying to figure out who has friends in President Donald Trump ’s new administration, and task forces have been created to monitor his Twitter account.

At a dinner party during the Detroit auto show earlier this month, Ford Motor Co. Chief Executive Mark Fields said he reread Mr. Trump’s “The Art of the Deal” over the holidays. He first read it in the 1980s, but wants to better understand the new occupant of the Oval Office.

American companies, several of which have been scolded by Mr. Trump, often via Twitter, are suddenly grappling with a new, unpredictable force in their operations. Barbs have included the price the Pentagon pays for Lockheed Martin Corp. jets and whether Carrier Corp. assembles furnaces in Indiana. AT&T Inc. Chief Executive Randall Stephenson recently met with Mr. Trump, who had expressed concerns about the telecom giant’s proposed purchase of Time Warner Inc.

In other words, rather than worrying about pleasing consumers, auto companies are spending all their time figuring out how to please the occupant of the White House.  This sounds more like corporate life in Venezuela than the US.  It is absurd that Trump claims to be about reducing regulation, and then personally intervenes to micro-manage corporate division-of-labor and sourcing decision.

We need new consumer activist organizations.  The classic ones, like Nader's PIRG, are captured by progressives and economic illiterates.  Economic nationalism and tariffs and reduced immigration and border taxes and elimination of free trade treaties are all direct assaults on the American consumer.  Do all the Midwestern folks who voted for Trump ostensibly because they are struggling economically really want 20% higher prices in their Wal-Mart?

Postscript:  By the way, for a moment let's accept this awful situation.  Consider women's groups (as discussed here) and their response to Trump and Ford's response.  Which is more likely to succeed?  If abortion were my #1 issue (as it is for my wife), I would be seriously concerned that women's groups were using all the wrong tactics.  Trump is petulant.  He does not back down based on protests, he moves you up the target list.   This is a terrible, awful character flaw, but it is reality.  If women's groups had calmly sat down with Trump in a back room and worked out a deal (with a man who is a lifelong social liberal) they would probably be further ahead.