Another Sad Example of Mitchell’s Law

I’ve decided my one legacy to the world is the phrase, “Bad government policy begets more bad government policy.” This term, which I am modestly calling Mitchell’s Law, describes what happens when government intervention (Fannie and Freddie, for example, or Medicare and Medicaid) causes problems in a particular market (a housing bubble or a third-party payer crisis), which leads the politicians to impose more misguided intervention (bailouts or Obamacare).

Here’s a good example from Germany. The politicians created government-run healthcare. Overweight people are putting a larger burden on the system, imposing costs on taxpayers. The logical response is to shift to a market-based system where people are in charge of their own healthcare costs. Not surprisingly, that option isn’t being considered. Instead, politicians are using the situation as an excuse to consider even more taxes.

Marco Wanderwitz, a conservative member of parliament for the German state of Saxony, said it is unfair and unsustainable for the taxpayer to carry the entire cost of treating obesity-related illnesses in the public health system. “I think that it would be sensible if those who deliberately lead unhealthy lives would be held financially accountable for that,” Wanderwitz said, according to Reuters. Germany, famed for its beer, pork and chocolates, is one of the fattest countries in Europe. Twenty-one percent of German adults were obese in 2007, and the German newspaper Bild estimates that the cost of treating obesity-related illnesses is about 17 billion euro, or $21.7 billion, a year. …Health economist Jurgen Wasem called for Germany to tackle the problem of fattening snacks in order to raise money and reduce obesity. “One should, as with tobacco, tax the purchase of unhealthy consumer goods at a higher rate and partly maintain the health system,” Wasem said, according to Germany’s English-language newspaper The Local. “That applies to alcohol, chocolate or risky sporting equipment such as hang-gliders.” Others are suggesting even more extreme measures. The German teachers association recently called for school kids to be weighed each day, The Daily Telegraph said. The fat kids could then be reported to social services, who could send them to health clinics.

Read Full Post »

Driving Companies from the U.S. Market with too Much Regulation and Litigation

Almost every regulation presumably produces some benefit. The real issue is whether the benefits are significant and – even more important – whether they exceed the costs. Unfortunately, most regulations fail this common-sense test. A German magazine provides some good evidence, reporting that major companies from Germany are choosing to “de-list” from the New York Stock Exchange because of pointless regulation and costly litigation. This may not seem like much, but it is symbolic of a market that is increasingly unfriendly to business and entrepreneurship. Something to think about the next time you hear a politician wonder why more jobs aren’t being created.

With expensive accounting rules, an increased threat of litigation and hundreds of millions of dollars in fines for some firms, the once prestigious New York Stock Exchange and other American markets have become unattractive to Germany’s biggest companies. Daimler and Deutsche Telekom have fled this year and the few remaining are likely to follow. …regulations introduced by the United States government in the wake of the accounting scandals in the early 2000s brought extra oversight and added costs for foreign companies listed on the NYSE. Of the 11 firms on Germany’s DAX index of blue chip companies that were at one time listed on the NYSE, only four still remain: Deutsche Bank, Fresenius, SAP and Siemens. …The attractiveness of the American capital market to German firms began to erode with Sarbanes-Oxley. …From the start, companies voiced their displeasure with the high costs required to comply with the reforms. In one provision, companies were obligated to hire an independent auditor to monitor and report on the company’s financial reporting. …German firms cross-listed in the United States spent between €10 and €15 million annually on SEC compliance, a survey conducted by Stadtmann and his colleagues found. Most companies would not disclose the exact amount of money they spent on SEC compliance, but a Deutsche Telekom spokesperson told SPIEGEL ONLINE costs were in the “low double-digits” of millions of euros and another at Daimler said they did not exceed €10 million. When Telekom and Daimler announced their departures from the NYSE in April and May respectively, the main reason the companies said publicly was to reduce the complexity of financial reporting and administrative costs. On average, companies must add another five to 10 people to their payroll for SEC compliance alone, and a company may need a dozen workers for required executive compensation disclosures, says Miers. …The double-digit costs of SEC compliance, however, are paltry compared the hundreds of millions of dollars in liability — either through lawsuits or investigations and prosecutions — to which a US listing can expose foreign firms. …”What the SEC fully doesn’t grasp to today is that dealing with the US regulation system is a nightmare,” he says. “It’s another reason to run to the exit door.” Sarbanes-Oxley reforms also require a company executive to approve on all financial reports. “The most important thing (about Sarbanes-Oxley) is that the CEO and CFO sign for the financial statements,” says Stadtmann. “All it takes is one person in the company to make a mistake and (an executive) can go to jail.” …Stadtmann believes Siemens will pull out at the first opportunity.

Read Full Post »

Great Moments in Government Waste, the European Version

It’s aggravating and maddening to send tax dollars to Washington and watch them get wasted on pork-barrel projects and inefficient programs. Imagine how much worse it would be, though, to send tax dollars to an international bureaucracy and be utterly helpless to stop the worst kinds of boondoggle spending. That’s how taxpayers from European nations must feel when they discover, as the Daily Mail reveals, that the European Commission bureaucrats squandered close to $20 million to conclude that fruit is a healthy food and to create a “Mr. Fruitness” superhero character.

EU bureaucrats have squandered millions of pounds on a study which reached the unsurprising conclusion that fruit is good for you. An astonishing 13.8million euros – some £11.7million – has been spent on research involving 200 scientists which found that ‘two apples a day keep cholesterol at bay’. Much of the money went on developing and promoting a green-skinned EU superhero called Mr Fruitness designed to persuade children to eat more fruit. …The multi-million pound project called IsaFruit lasted four years. …The website set up to publicise Mr Fruitness…describes him as ‘a superhero with special powers that come from the nutritional substances in fruit – vitamins and others; key components of an intelligent and conscious diet’.

Read Full Post »