Economics @ ITT

Why Are American Health Care Costs So High?

Posted in economics, Policy Issues by ittecon on September 20, 2013


Big Unemployment, the New Normal?

Posted in economics, employment, macroeconomics, Policy Issues, Regulation, Taxation by ittecon on July 9, 2013

I tried to respond to a post by Don Peppers responding to this article, but LinkedIn limits the character count. I quote Don’s post here for context.

It’s common knowledge that LESS government, LESS regulation, and LOWER marginal tax rates will all improve employment. Unfortunately, the politics of envy is irresistible to some, and there are very few politicians on either side of the aisle who will vote for less of anything related to the government.

It may be common knowledge that less of these things might increase employment, but this favours a local maxima at the expense of a global maxima. It is the typical short-term benefit with a long-term detriment. Still, this argument and its subarguments are specious. I won’t even give any more attention to the dubious official unemployment figure definition and methodology.

Less government is a vague term. What government? Fewer dog-catchers? Interesting how, ad reductio, this becomes an argument for anarchy.

As for regulations, business favours regulations that shield it from the public and markets; intellectual property “rights” come to the top of my mind. Government (or a quasi-government acting entity) are necessary so as not to devolve into a situation where warlords rule. Afghanistan comes to mind. I could imagine a football match with no rules or regulations. Even rugby and UFC have rules, as do wars.

In economic terms, the lower marginal taxes argument is patently false (without even delving into marginal verse effective territory). Laffer’s concept is not false in and of itself, but it fails on two accounts. First, we can agree that at some point lowering marginal tax rates will create positive incentives, but it doesn’t follow this is true at all levels. Empirically, we can easily determine that we are below that point. On a practical level, this not only means that a reduction with not have positive effects; there will be negative effects. Second, the primary driver to hiring is demand for products or services (or at least the prospect thereof). A marginal tax rate of zero has no impact if no one is purchasing what I am offering.

Why Should Taxpayers Give Big Banks $83 Billion a Year?

Posted in economics by ittecon on June 21, 2013

The top five banks—JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc.—account for $64 billion of the total [US government tax] subsidy [of $83 billion], an amount roughly equal to their typical annual profits see tables for data on individual banks. In other words, the banks occupying the commanding heights of the U.S. financial industry—with almost $9 trillion in assets, more than half the size of the U.S. economy—would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

via Why Should Taxpayers Give Big Banks $83 Billion a Year? – Bloomberg.

California To Wal-Mart: No More Taxpayer Subsidized Profits For You

Posted in economics by ittecon on June 5, 2013

For years, Wal-Mart—and other large retail operators—have been piling up huge profits by controlling their labor costs through paying employees sub-poverty level wages. As a result, it has long been left to the taxpayer to provide healthcare and other subsidized benefits to the many Wal-Mart employees who are dependent on Medicaid, food stamp programs and subsidized housing in order to keep their families from going under.

via California To Wal-Mart: Enough! No More Taxpayer Subsidized Profits For You – Forbes.

Beware of Economic Nonsense Trotted Out by Profit-Seeking Corporations

Posted in economics by ittecon on May 29, 2013

Consumer benefits may sometimes exceed such costs. But, as we’ve painfully learned over the years (the Wall Street meltdown, the BP oil spill in the Gulf, consumer injuries and deaths from unsafe products, worker injuries and deaths from unsafe working conditions, climate change brought on by carbon dioxide emissions, and, yes, manipulation of the tax laws – need I go on?), the social costs may also exceed consumer benefits.

via Beware of Economic Nonsense Trotted Out by Profit-Seeking Corporations and Their Stooges | Alternet.

We’re living in an Ayn Rand economy

Posted in economics, Taxation by ittecon on May 18, 2013

Ayn Rand’s philosophy suggests that average working people are “takers.” In reality, those in the best position to make money take all they can get, with no scruples about their working-class victims, because taking, in the minds of the rich, serves as a model for success. The strategy involves tax avoidance, in numerous forms.

via We’re living in an Ayn Rand economy –

Markets Are Not Stable, Efficient, or Self-Correcting

Posted in economics, macroeconomics, Policy Issues by ittecon on May 3, 2013

“In analyzing the most recent financial crisis, we can benefit somewhat from the misfortune of recent decades. The approximately 100 crises that have occurred during the last 30 years—as liberalization policies became  dominant—have given us a wealth of experience and mountains of data.  If we look over a 150 year period, we have an even richer data set.”

via The Lessons of the North Atlantic Crisis for Economic Theory and Policy | iMFdirect – The IMF Blog.

Welcome to the 19th Century

Posted in economics by ittecon on April 30, 2013

“Imagine you’ve just landed a job with a big-time retailer. Your task is to load and unload boxes from trucks and containers. It’s back-breaking work. You toil 12 to 16 hours a day, often without a lunch break. Sweat drenches your clothes in the 90-degree heat, but you keep going: your kids need their dinner. One day, your supervisor tells you that instead of being paid an hourly wage, you will now get paid for the number of containers you load or unload. This will be great for you, your supervisor says: More money!  But you open your next paycheck to find it shrunken to the point that you are no longer even making minimum wage.”

via When Your Boss Steals Your Wages: The Invisible Epidemic That’s Sweeping America | Alternet.

Did The Government Cause Our Long-Term Unemployment Problem?

Posted in economics by ittecon on April 24, 2013

I thought not.

Regulations and taxes do make it hard to grow a business and create new jobs, a point I made in my last post.  And extended unemployment benefits do give people an incentive to stay home instead of finding a job.  Indeed, I know people who have done just that.  One of them wrote a novel that sold for a bunch of money and earned back all the benefits theyd collected, and then some.  The rest of them basically sat around and did nothing until their benefits ran out, and then found another job.

via Did The Government Cause Our Long-Term Unemployment Problem? – The Daily Beast.

The Supreme Court Has the Constitutional Power to Hike Medicine Prices to 5x Their Cost?

Posted in antitrust, economics, Policy Issues, Regulation, Taxation by ittecon on March 30, 2013

U.S. pharmaceuticals get a very good deal from the federal government. For every new drug they produce, they get rewarded with long-term patents that grant them exclusive rights to market and sell the product for as much as 20 years – which guarantees them billions in profits and no competitors in the marketplace. Drug companies claim that they must be allowed to profit off of products they nurtured with expensive research and development. In reality, taxpayer-funded research from academia or the National Institutes of Health account for the vast majority of vital drugs brought to market every year, and R&D is a small fraction of the overall drug company budget. What’s more, drug companies routinely use their monopoly power to jack up pharmaceutical prices, which cost far more in the U.S. than anywhere in the world.

via Where Does It Say the Supreme Court Has the Constitutional Power to Hike Medicine Prices to 5x Their Cost? | Alternet.