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Archive for the ‘Regulation’ Category

It would require several people, working around the clock, to provide daily updates about the bizarre and senseless actions of the crowd in Washington.

And you’d need many additional people to monitor the foolish decisions in state capitals.

I certainly try to do my small part, sharing example of jaw-dropping vapidity by our overseers in government (especially in New York City and California).

But I don’t like to discriminate, which is why I periodically highlight inane behavior by foreign bureaucrats and politicians. And we have two perfect examples today. We’ll start north of the border.

Here are some passages from a CBC report about nanny-state overkill from Canada (h/t: Lenore Skenazy).

Clayton, 8, and Kristopher Cadieux, 10, started their business last summer, digging up worms and selling them as bait for $2.50 per dozen. But after a complaint from a neighbour, the brothers received a note from the city saying they were breaking a bylaw and had to shut down their business. The mayor of Cornwall, Leslie O’Shaughnessy, explained that the bylaw requires all personal business sales be conducted within the home, without outdoor signage. …The city told the brothers to move their business inside their home, and to take down their signs on their front lawn. …Kristopher said the worm enterprise only brought in about $34 a month last summer, and he doesn’t understand why he and his brother are being told they can’t sell worms from their front lawn.

How dare these kids display entrepreneurship.They’re almost as bad as the Canadian kid who got in trouble for stopping a knife attack.

But I still think America wins the prize for teaching kids bad lessons. After all, local government officials have heroically thwarted rogue operators of unregulated and unlicensed lemonade stands, in California, Georgia, and Oregon!

Without adequate government supervision, you never know what might happen. If you allow kids to engage in voluntary exchange, maybe that will be the gateway step to other forms of anti-social behavior. Such as snow removal without government approval. Or giving topless haircuts without a cosmetology license!

Our second example of foreign government stupidity comes from the United Kingdom, which is infamous for astounding – and embarrassing – episodes of political correctness.

But this latest example, reported by the U.K.-based Metro, represent the ultimate triumph of the P.C. culture (h/t: Amy Alkon).

…according to one school, Wonder Woman and her Golden Lasso of Truth are…not suitable lunchbox fodder. According to Redditor twines18, who posted a copy of the letter and offending lunchbox on Imgur, the lunchbox contravened the schools dress code which states children aren’t allowed to bring ‘violent images’ into the building. The letter states: ‘We have defined “violent characters” as those who solve problems using violence. Super heroes certainly fall into that category.’

Part of me is convinced this is a joke, but it seems legit.

And let’s remember this is coming from a nation where anti-gun fanaticism results in jaw-dropping displays of government stupidity.

Anyhow, here’s the letter that was sent to the parents.

So solving problems using violence is bad?

I guess that means this school doesn’t teach the kids about World War II. After all, Churchill and other U.K. leaders obviously took the wrong approach. I’m sure a big group hug would have sufficed to stop Hitler and the rest of the National Socialists.

P.S. Speaking of England, the U.K.-based Spectator reports that local universities have an unfortunate habit of filling the heads of foreign students with very bad economic theories. And when those students gain power in their home countries, you get very bad results.

Varoufakis was a product of British universities. He read economics at Essex and mathematical statistics at Birmingham, returning to Essex to do a PhD in economics. With the benefit of his British university education he returned to Greece and, during his short time in office, obliterated the nascent recovery.But Varoufakis is not alone. Plenty of other visitors to our universities have been influenced by the teaching here and returned to their countries to wreak havoc. Jawaharlal Nehru, the first prime minister of an independent India…was influenced by British intellectuals such as George Bernard Shaw, a socialist, Bertrand Russell, who once remarked ‘communism is necessary to the world’, and John Maynard Keynes. He returned to India and started to put the ideology into practice with state planning, controls and regulations. This was a calamity. …Julius Nyerere, president of Tanzania,…read economics and history at Edinburgh (as did Gordon Brown). Naturally he was surrounded by leftist academics and apparently ‘encountered Fabian thinking’ in particular. The experience made it all but inevitable that Tanzania would endure a bloated bureaucracy, shortages and miserably low growth. …the London School of Economics can rightly claim more than its share, of course. Jomo Kenyatta, first prime minister of Kenya after independence, went there. …overblown, corrupt state industries and attempted import substitution took their toll, so that GDP growth per capita was low and, in some years, negative. …Pierre Trudeau…came to the LSE for his doctorate. He did not finish it but the LSE nonetheless gave him a finishing course in leftist economics. Under his rule, Canada introduced wage and price controls while inflation, unemployment and the national debt all rose. Zulfikar Ali Bhutto, variously president and prime minister of Pakistan, went to…Oxford. …once he had gained power, declaring ‘socialism is our economy’, he nationalised the steel, chemical, cement and banking industries along with the flour, rice and cotton mills. Economic growth slowed to a crawl.

Wow, what a rogue’s gallery of statist politicians.

Though, to be fair, I don’t think you automatically get bad ideas by studying economics in the United Kingdom. It’s a function of being “taught” be misguided professors.

After all, just think what must happen to foreign students in America who take classes from Paul Krugman. If these examples (here, here, here, herehereherehereherehere, herehere, and here) are any indication, they probably experience un-learning.

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This century has not been good news for economic liberty in the United States.

According to Economic Freedom of the World, America has dropped from being the 3rd-freest economy of the world in 2001 to the 12th-freest economy in the most recent rankings.

Perhaps more important, our aggregate score has fallen from 8.20 to 7.81 over the same period.

So why has the U.S. score dropped? Was it Bush’s spending binge? Obama’s stimulus boondoggle? All the spending and taxes in Obamacare? The fiscal cliff tax hike?

I certainly think all those policies were mistaken, but if you dig into the annual data, America’s score on “size of government” only fell from 7.1 to 7.0 between 2001 and 2012.

Which means economic freedom in the United States mostly declined for reasons other than fiscal policy. In other words, our score dropped because of what happened to our scores for trade policy, monetary policy, regulatory policy, and property rights and rule of law.

That triggered my curiosity. If America is #12 in the overall rankings, how would we rank if fiscal policy was removed from the equation?

Here are the results, showing the top 25 jurisdictions based on the four non-fiscal policy factors. As you can see, the United States drops from #12 to #24, which means we trail 14 European nations in these important measures of economic freedom.

If you look in the second column, you’ll notice how many of those European nations have double-digit increases when you look at their non-fiscal rankings compared to their overall rankings.

This is for two reasons.

First, their fiscal scores are terrible because of high tax rates and a stifling burden of government spending.

Second, these same nations are hyper-free market on issues such as trade, regulation, money, rule of law and property rights.

In other words, the data back up points I’ve made about policy in nations such as Denmark and Sweden.

In an ideal world, countries should have free markets and small government. In Northern Europe, they manage to get the first part right. Which is important since non-fiscal factors account for 80 percent of a nation’s overall grade.

Now let’s return to the issue of America’s decline.

Here are the non-fiscal rankings from 2001. As you can see, the United States was #5 at the time, scoring higher than even Singapore and Hong Kong. And the U.S. was behind only three European nations back in 2001.

For what it’s worth, America’s score has fallen primarily because of a significant drop in the trade category (from 8.7 to 7.7) and a huge drop for rule of law and property rights (from 8.7 to 7.0).

In other words, it’s not good for prosperity when a nation begins to have problems such as protectionism and politicized courts.

P.S. The erosion of America’s score for non-fiscal factors is particularly disappointing since improvements in those factors have played a big role in protecting the world from the negative economic consequences of more spending and taxes.

P.P.S. I think this is an example of correlation rather than causation, but the above rankings for non-fiscal economic liberty seem somewhat similar to the rankings I shared last week looking at overall societal freedom.

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What’s the best way to understand the burden of government regulation and red tape?

Is it better to focus on the overall burden by sharing data about aggregate cost, job losses, time wasted, and foregone growth?

Or is it better to look at specific examples of regulatory foolishness, such as silly rules that force consumers to use crummy dishwashers, inferior light bulbs, substandard toilets, and inadequate washing machines?

If the latter approach is best, we have a great (in a bad sense) new example.

Nicole Carroll of CrossFit has a column in the Washington Post that dissects a disturbing new regulatory scheme from the busy-body local government.

D.C….government is developing misguided regulations that would add burdensome red tape to the most innovative fitness programs. Specifically, the D.C. Council has enacted a law — the first in the nation — that would define what personal fitness trainers can and cannot do, require them to register.

Just in case you think this sounds reasonable in theory (and you shouldn’t), take a look at what it means in practice.

If early drafts of the regulations are advanced, D.C. fitness trainers will have to divert their attention from improving lives to bureaucratic burdens: taking courses they don’t need, adhering to methods they don’t believe in, paying fees that will be passed on to their clients and looking over their shoulders at ever-present regulators. The draft regulations even call for a four-year college degree.

Huh?!? Why would a personal trainer need a college degree? And why should trainers be forced to take courses or follow one-size-fits-all methodologies?

Sounds like a bunch of red tape that will make it hard for low-income people to become trainers.

And what will this mean for consumers?

Well, higher costs at the very least.

The immediate impact would be to make fitness programs less accessible, more expensive and more elitist. Thousands of residents would lose the opportunity to follow programs that will help them get stronger, lose weight and enjoy a better quality of life.

Sound like a lose-lose proposition, right?

Who could be for such a bad idea? Why are D.C. politicians pushing such a foolish plan?

The answer is special-interest corruption.

…entrenched interests can drive up costs and close markets for competitors, preventing new products and services from improving the status quo. The groups pushing hardest for licensure are entrenched institutions such as the American College of Sports Medicine, the National Strength and Conditioning Association and the Register of Exercise Professionals. …a not-so-credible agenda to defend their long-established but increasingly threatened business models and stifle successful competition. They want the licensing because they will profit from it. For those in the Exercise Industrial Complex, the fear of disruptive competition explains why they want to make the District the first jurisdiction in the nation to regulate fitness programs.

Here’s the bottom line.

Instead of raising standards, burdensome regulations would have the effect of driving newcomers out of the industry — and pricing many moderate-income people out of fitness programs.

Licensing and regulation of personal trainers is just one example of a worrisome trend in governments across the country.

This video from the Institute for Justice has disturbing details of how special interests conspire with politicians in various states to impose high burdens that make it hard for people to work.

Isn’t this typical? Politicians always claim to be for the little guy, but licensing rules are all about erecting high barriers to protect entrenched incumbents from competition.

This chart shows how much time and money is needed to work in certain professions that generally use lower-income workers.

By the way, the same principle applies to the tax system. The political elites often argue against a flat tax because it would be a boon to the rich.

But it’s the powerful and well-connected that benefit from the Byzantine system of credits, exemptions, deductions, exclusions, preferences, and other loopholes in the tax code.

Rest assured that poor people aren’t hiring all the high-paid lobbyists that specialize in manipulating the tax code in Washington. Which is why honest and well-intentioned leftists should support real tax reform. Just like they should support sweeping deregulation.

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When writing about the burden of regulation, I often share big numbers about aggregate cost, job losses, time wasted, and foregone growth.

But I sometimes wonder if such data is effective in the battle for good policy.

Maybe it’s better, at least in some cases, to focus on regulations that affect quality of life for regular people. Lots of ordinary citizens, for instance, are irked that they’re now forced to use inferior light bulbs, substandard toilets, and inadequate washing machines because of regulatory silliness from Washington.

And it looks like we’ll now be forced to use dishwashers that don’t clean dishes thanks to proposed regulations that will reduce water use (which is in addition to a 2012 regulation that already restricted water use).

The Hill reports on the Nanny State’s latest salvo in the war against modern civilization.

The Association of Home Appliance Manufacturers is accusing the Department of Energy (DOE) of a politically motivated drive to increase dishwasher efficiency standards, which are so bad that they would cause consumers to re-wash dishes, erasing any efficiency gains. Rob McAver, the group’s head lobbyist, said regulators are going too far and the new rules will allow only 3.1 gallons to be used to wash each load of dishes. …They then ran standard tests with food stuck to dishes. “They found some stuff that was pretty disgusting,” McAver said. …“The poor performance that would result would totally undercut and go backwards in terms of energy and water use, because of the need for running the dishwasher again, or pre-rinsing or hand-washing, which uses a lot of water,” he said.

Great, another bone-headed step by the government that will make life less enjoyable.

I’m already one of those people who rinse my dishes before putting them in the dishwasher because I hate the idea that they won’t be fully clean afterwards.

So I can only imagine how bad it will be if this absurd example of red tape is imposed and I have to buy a new dishwasher.

I guess I’ll just keep my fingers crossed that my current dishwasher doesn’t break down.

Especially since the rules make new dishwashers more expensive.

Ernest Istook, former Republican congressman from Oklahoma, wrote in a Washington Times piece that complying with the 2012 rule, based on DOE estimates, added roughly $44 to the cost of each machine. “Now their 2015 proposal will add another $99 to the price tag, even by DOE’s own admission,” he wrote.

Julie Borowski has the right assessment. Her column for Freedom Works is from 2012, but it’s very appropriate still today.

Are you disappointed in every shower head that you purchase? Does your toilet have trouble flushing? Have you noticed that your dishes are still dirty after the dishwasher cycle is completed? …Some of us may be quick to blame the manufacturer of these home appliances. But the manufacturers are just abiding by the costly regulations by the Environmental Protection Agency (EPA) and the Department of Energy.

What’s really frustrating is that these regulations reduce the quality of life without even reducing water usage.

…it has only led to people hacking their shower heads to remove the intrusion that is blocking water flow in order to have a more relaxing shower that actually gets them clean. There is no proof that the water restrictions have actually saved water because many people just end up taking longer showers than they otherwise would.

Amen. Every so often I wind up at a hotel with restricted-flow showerheads and it’s a hassle because I probably spend twice as long in the shower.

Not to mention problems government has created elsewhere in bathrooms.

…water restrictions are also the reason that our toilets have trouble flushing. Many of us have become accustomed to flushing the toilet multiple times before the toilet bowl is clear. The 1992 Energy Policy Act states that all toilets sold in the United States use no more than 1.6 gallons of water per flush. These water restrictions are the reason why we have to use plungers far more often than we used to.

I won’t torment readers with a TMI moment, but I will say that I now routinely flush at the halfway point when seated on a toilet. And even that doesn’t necessarily preclude a third flush at the end of the process.

The only good news is that this gives me a daily reminder that government has far too much power to micro-manage our lives.

Speaking of excessive government, here’s another example of the regulatory state run amok.

Perhaps you’ve heard of the federal milk police? Well, now we’ll have the federal pizza police, as explained by The Manhattan Institute.

Pizza makers could face fines and prison time under a new Food and Drug Administration rule for failing to provide calorie counts for their billions of combinations of pizza orders. …FDA’s menu labeling rule will go into effect on December 1st, 2016… If a company does not perfectly comply with the mandate, food may be rendered “misbranded” under the Federal Food, Drug, and Cosmetic Act, a violation that carries criminal penalties. Failure to comply with the regulation could lead to government seizure of food, a maximum $1,000 fine, and a one-year prison sentence. …Revising systems under strict compliance with the regulation’s guidelines is expected to cost Domino’s $1,600 to $4,700 per restaurant annually. In general, the rule is expected to cost businesses $537 million, losses that necessarily must be passed on to consumers in the form of higher prices.

And I doubt anyone will be surprised to learn that all this coercion and red tape will have no positive effect.

Several studies on the effectiveness of calorie displays suggest the mandate will have little to no effect on the public’s choices. In one study on menu-labeling in New York City, Brian Elbel, a professor at New York University, found that only 28 percent of people who saw calorie labels said that the information influenced their choices. There was no statistically significant change in calories purchased. In another study, Lisa Harnack of the University of Minnesota examined whether knowledge about calorie counts of menu items would influence how much a person ate, even if the information did not change ordering habits. A lab study revealed that, overall, consumers did not change how much they ate after receiving information about their food’s caloric content.

Which is why, when writing about this topic last year, I predicted “If this regulation is implemented, it will have zero measurable impact on American waistlines.

P.S. Keep in mind we already have the federal bagpipe police, the federal pond police, and the federal don’t-whistle-at-whales police.

P.P.S. As I repeatedly warn, if the answer is more government, someone’s asked a very silly question.

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Before getting to the main topic today, here are some excerpts from a New York Post story that patriotic American readers will appreciate.

It deals with a protest.

…the group Disarm the Police…had announced on social media that they had planned to burn the flag in protest of NYPD policies.

But the event didn’t go as planned, thanks to members of the Hallowed Sons Motorcycle Club.

One of the bikers rushed forward in a fit of rage and kicked over the grill, sending embers flying. He then doused it as members of the pro-flag crowd chanted “USA! USA!” The bikers then started trying to rough up the protesters.

Here’s where the ironic part of the story.

…anti-NYPD protesters needed New York’s Finest to save their skin from a gang of angry bikers who tried to pummel them… The protesters were shielded by the cops and escorted out of the park.

And here’s some evidence that silly government regulations (a New York City tradition) take the fun out of protesting and counter-protesting.

While it’s illegal to openly burn anything in Fort Greene Park, the self-styled anarchists managed to find a loophole in the law that allows cooking in closed barbecue grills.

A few final comments on this story.

I realize I shouldn’t care, but I’m always dumbfounded when left-wing crazies refer to themselves as anarchists. Don’t they realize that you can’t be an anarchist while simultaneously advocating for much bigger government?

Reminds me of this bit of humor from the Libertarian Party.

In any event, the supposed anarchists obviously aren’t very bright since they thought it was a good idea to get on the wrong side of a bunch of bikers.

Since this is America’s Independence Day, I can’t help but think they got what they deserved, even though in the abstract I support their right to protest and burn flags that they bought with their own money (or, more likely, with money from their parents or from the welfare office).

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Now for today’s main topic.

I appreciate tax havens for many reasons, mostly having to do with the importance of having some sort of external constraint on the tendency of politicians to over-tax and over-spend.

But I also like these low-tax jurisdictions for non-tax reasons. And high on my list is that I want people to have safe havens for their money as an insurance policy against governments that are incompetent, venal, abusive and/or corrupt.

And for the same reason, I like alternative currencies such as bitcoin (click here is you want to see a short and informative primer). These “cryptocurrencies” give people a way of protecting themselves when government mis-manage or mis-use monetary and financial systems.

And we have some very compelling real-world examples of how this works.

We’ll start with Greece, where people with bitcoins still enjoy liquidity. Those using the banking system, by contrast, are in trouble because of irresponsible government policy.

Here are some excerpts from a Reuters story.

There is at least one legal way to get your euros out of Greece these days, to guard against the prospect that they might be devalued into drachmas: convert them into bitcoin. Although absolute figures are hard to come by, Greek interest has surged in the online “cryptocurrency”, which is out of the reach of monetary authorities and can be transferred at the touch of a smartphone screen. New customers depositing at least 50 euros with BTCGreece, the only Greece-based bitcoin exchange, open only to Greeks, rose by 400 percent between May and June, according to its founder Thanos Marinos, who put the number at “a few thousand”. The average deposit quadrupled to around 700 euros.

Why are people shifting to bitcoin?

One part of the answer is that bitcoins are insulated from political risk.

Using bitcoin could allow Greeks to do one of the things that capital controls were put in place this week to prevent: transfer money out of their bank accounts and, if they wish, out of the country. …the bitcoin buyers’ main aim was to shield their money against the prospect that Greece might leave the euro zone and convert all the deposits in Greek banks into a greatly devalued national currency.

And is anyone surprised that there’s interest from other failing welfare states?

Coinbase, one of the world’s biggest bitcoin wallet providers, which is not currently accessible to Greeks, said it had seen huge interest from Italy, Spain and Portugal.

And it’s just a matter of time, I suspect, before there will be interest from France, Belgium, Japan, etc.

Now let’s look at Argentina, another corrupt and dysfunctional government that has a sordid history of abusing both the monetary system and the financial system.

The New York Times in May had an in-depth report on how people in that nation have been using bitcoin to circumvent bad government policy.

His occupation is one of the world’s oldest, but it remains a conspicuous part of modern life in Argentina…to serve local residents who want to trade volatile pesos for more stable and transportable currencies like the dollar. For Castiglione, however, money-changing means converting pesos and dollars into Bitcoin, a virtual currency, and vice versa. …Castiglione joked about the corruption of Argentine politics as he peeled off five $100 bills, which he was trading for a little more than 1.5 Bitcoins, and gave them to his client. …before showing up, he had transferred the Bitcoins — in essence, digital tokens that exist only as entries in a digital ledger — from his Bitcoin address to Castiglione’s.

Why are so many people interested in bitcoin?

Because the government is debasing and manipulating the official currency in ways that indirectly steal from the citizenry.

Had the German client instead sent euros to a bank in Argentina, the musician would have been required to fill out a form to receive payment and, as a result of the country’s currency controls, sacrificed roughly 30 percent of his earnings to change his euros into pesos. Bitcoin makes it easier to move money the other way too. The day before, the owner of a small manufacturing company bought $20,000 worth of Bitcoin from Castiglione in order to get his money to the United States, where he needed to pay a vendor, a transaction far easier and less expensive than moving funds through Argentine banks.

And don’t forget that Argentina’s government is one of the nations with a track record of stealing money when it’s left in banks.

Commerce of this sort has proved useful enough to Argentines that Castiglione has made a living buying and selling Bitcoin for the last year and a half. …The money brought to Argentina using Bitcoin circumvents the onerous government restrictions on receiving money from abroad. …It makes sense that a place like Argentina would be fertile ground for a virtual currency. Inflation is constant: At the end of 2014, for example, the peso was worth 25 percent less than it was at the beginning of the year. And that adversity pales in comparison with past bouts of hyperinflation, defaults on national debts and currency revaluations. Less than half of the population use Argentine banks and credit cards. Even wealthy Argentines fear keeping their money in the country’s banks.

Bitcoin protects consumers from rapacious and feckless politicians.

…in the fall of 2012, when the Argentine government ordered PayPal to bar direct payments between Argentines, part of the government’s effort to slow the exchange of pesos into other currencies. …Argentines were using Bitcoin to circumvent the government’s restrictions. “…competition eliminates all currencies from noneffective governments,” it said… In Argentina, the banks refuse to work with Bitcoin companies like Coinbase, which isn’t surprising, given the government’s tight control over banks. This hasn’t deterred Argentines, long accustomed to changing money outside official channels.

In an ideal world, of course, there would be no need for bitcoin. At least not as a hedge against bad government policy (if a world of private monies, of course, cryptocurrencies presumably would be one of the market-based options).

But we don’t live in an ideal world. Some of us already live in nations where government financial and/or monetary policy make bitcoin a very important alternative.

And others of us live in countries where there is good reason to worry about future instability because of misguided fiscal, monetary, and economic policy. So it will be good if we have options such as bitcoin.

That doesn’t mean, to be sure, that the average person should transfer all their liquid wealth into bitcoin. Indeed, I’ve specifically stated that “I wouldn’t put my (rather inadequate) life savings in bitcoin.

But I certainly want that option if future events warrant a change of strategy.

P.S. If you’re in a patriotic mood (and if you like the Second Amendment), then you’ll definitely enjoy this slideshow.

P.P.S. If you enjoyed the six-frame image about bitcoin owners, you’ll probably like a similar image portraying libertarians.

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When debating and discussing the 2008 financial crisis, there are two big questions. And the answers to these questions are important because the wrong “narrative” could lead to decades of bad policy (much as a mistaken narrative about the Great Depression enabled bad policy in subsequent decades).

  1. What caused the crisis to occur?
  2. What should policy makers have done?

In a new video for Prager University, Nicole Gelinas of the Manhattan Institute succinctly and effectively provides very valuable information to help answer these questions. Particularly if you want to understand how the government promoted bad behavior by banks and created the conditions for a crisis.

Here are some further thoughts on the issues raised in the video.

Deregulation didn’t cause the financial crisis – Nicole explained that banks got in trouble because of poor incentives created by previous bailouts, not because of supposed deregulation. As she mentioned, their “risk models” were distorted by assumptions that some financial institutions were “too big to fail.”

But that’s only part of the story. It’s also important to recognize that easy-money policies last decade created too much liquidity and that corrupt subsidies and preferences for Fannie Mae and Freddie Mac steered much of that excess liquidity into the housing sector. These policies helped to create the bubble, and many financial institutions became insolvent when that bubble burst.

TARP wasn’t necessary to avert a meltdown – Because the video focused on how the “too big to fail” policy created bad incentives, there wasn’t much attention to the topic of what should have happened once big institutions became insolvent. Defenders of TARP argued that the bailout was necessary to “unfreeze” financial markets and prevent an economic meltdown.

But here’s the key thing to understand. The purpose of TARP was to bail out big financial institutions, which also meant protecting big investors who bought bonds from those institutions. And while TARP did mitigate the panic, it also rewarded bad choices by those big players. As I’ve explained before, using the “FDIC-resolution” approach also would have averted the panic. In short, instead of bailing out shareholders and bondholders, it would have been better to bail out depositors and wind down the insolvent institutions.

Bailouts encourage very bad behavior – There’s a saying that capitalism without bankruptcy is like religion without hell, which is simply a clever way of pointing out that you need both profit and loss in order for people in the economy to have the right set of incentives. Bailouts, however, screw up this incentive structure by allowing private profits while simultaneously socializing the losses. This creates what’s known as moral hazard.

I’ve often used a simple analogy when speaking about government-created moral hazard. How would you respond if I asked you to “invest” by giving me some money for a gambling trip to Las Vegas, but I explained that I would keep the money from all winning bets, while financing all losing bets from your funds? Assuming your IQ is at least room temperature, you would say no. But our federal government, when dealing with the financial sector, has said yes.

Good policy yields short-run pain but long-run gain – In my humble opinion, Nicole’s most valuable insight is when she explained the long-run negative consequences of the bailouts of Continental Illinois in 1984 and Long-Term Capital Management in 1998. There was less short-run pain (i.e., financial instability) because of these bailouts, but the avoidance of short-run pain meant much more long-run pain (i.e., the 2008 crisis).

Indeed, this “short termism” is a pervasive problem in government. Politicians often argue that a good policy is unfeasible because it would cause dislocation to interest groups that have become addicted to subsidies. In some cases, they’re right about short-run costs. A flat tax, for instance, might cause temporary dislocation for some sectors such as housing and employer-provide health insurance. But the long-run gains would be far greater – assuming politicians can be convinced to look past the next election cycle.

Let’s close by re-emphasizing a point I made at the beginning. Narratives matter.

For decades, the left got away with the absurd statement that the Great Depression “proved” that capitalism was unstable and destructive. Fortunately, research in recent decades has helped more and more people realize that this is an upside-down interpretation. Instead, bad government policy caused the depression and then additional bad policy during the New Deal made the depression longer and deeper.

Now we have something similar. Leftists very much want people to think that the financial crisis was a case of capitalism run amok. They’ve had some success with this false narrative. But the good news is that proponents of good policy immediately began explaining the destructive role of bad government policy. And if Nicole’s video is any indication, that effort to prevent a false narrative is continuing.

P.S. The Dodd-Frank bill was a response to the financial crisis, but it almost certainly made matters worse. Here’s what Nicole wrote about that legislation.

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When one thinks about all the Obamacare lies, it’s difficult to identify the worst one.

In other words, just about everything we were told was a fib. Even the tiny slivers of good news resulting from Obamacare were based on falsehoods.

So I almost feel like I’m guilty of piling on by writing about another big Obamacare lie.

But Charles Krauthammer has such a strong critique of Obamacare’s mandate for electronic health records that I can’t resist. He starts by pointing out that doctors are unhappy about this costly new mandate.

…there was an undercurrent of deep disappointment, almost demoralization, with what medical practice had become. The complaint was not financial but vocational — an incessant interference with their work, a deep erosion of their autonomy and authority…topped by an electronic health records (EHR) mandate that produces nothing more than “billing and legal documents” — and degraded medicine.

Not just unhappy. Some of them are quitting and most of them are spending less time practicing actual health care.

Virtually every doctor and doctors’ group I speak to cites the same litany, with particular bitterness about the EHR mandate. As another classmate wrote, “The introduction of the electronic medical record into our office has created so much more need for documentation that I can only see about three-quarters of the patients I could before, and has prompted me to seriously consider leaving for the first time.” …think about the extraordinary loss to society — and maybe to you, one day — of driving away 40 years of irreplaceable clinical experience.

Then Krauthammer exposes the deceptions we were fed when Obamacare was being debated.

The newly elected Barack Obama told the nation in 2009 that “it just won’t save billions of dollars” — $77 billion a year, promised the administration — “and thousands of jobs, it will save lives.” He then threw a cool $27 billion at going paperless by 2015. It’s 2015 and what have we achieved? The $27 billion is gone, of course. The $77 billion in savings became a joke. Indeed, reported the Health and Human Services inspector general in 2014, “EHR technology can make it easier to commit fraud,” as in Medicare fraud, the copy-and-paste function allowing the instant filling of vast data fields, facilitating billing inflation.

A boondoggle on the back of taxpayers. Flushing $27 billion is bad enough, but the indirect costs also are large.

That’s just the beginning of the losses. Consider the myriad small practices that, facing ruinous transition costs in equipment, software, training and time, have closed shop, gone bankrupt or been swallowed by some larger entity. …One study in the American Journal of Emergency Medicine found that emergency-room doctors spend 43 percent of their time entering electronic records information, 28 percent with patients. Another study found that family-practice physicians spend on average 48 minutes a day just entering clinical data.

Here’s the bottom line.

EHR is health care’s Solyndra. Many, no doubt, feasted nicely on the $27 billion, but the rest is waste: money squandered, patients neglected, good physicians demoralized.

Not much ambiguity in that sentence. To put it bluntly, “EHR” is the kind of answer you get when you ask a very silly question.

But on a more serious note, now read what Dr. Jeffrey Singer wrote about electronic health records. Simply stated, this is like Solyndra, but much more expensive. Instead of wasting a few hundred million on cronyist handouts to Obama campaign donors, EHR is harming an entire sector of the economy.

The only thing I’ll add is that neither Krauthammer nor Singer contemplated the possible risks of amassing all the information contained in EHRs given the growing problem of hacking and identity theft.

P.S. On another topic, I’ve written several times about the excessive pay and special privileges of bureaucrats in California.

Now, thanks to Reason, we can read with envy about another elitist benefit for that gilded class.

…a little-known California state program designed to protect police and judges from the public disclosure of their home addresses had expanded into a massive database of 1.5 million public employees and their family members… Because of this Confidential Records Program, “Vehicles with protected license plates can run through dozens of intersections controlled by red light cameras and breeze along the 91 toll lanes with impunity,” according to the Orange County Register report. They evade parking citations and even get out of speeding tickets because police officers realize “the drivers are ‘one of their own’ or related to someone who is.”

You may be thinking that the law surely was changed after it was exposed by the media.

And you would be right. But if you thought the law would be changed to cut back on this elitist privilege, you would be wrong.

…the legislature did worse than nothing. It killed a measure to force these plate holders to provide their work addresses for the purpose of citations — and expanded the categories of government workers who qualify for special protections. This session, the legislature has decided to expand that list again, never mind the consequences on local tax revenues, safety and fairness. …Given the overwhelming support from legislators, expect more categories to be added to the Confidential Records Program — and more public employees and their families being free to ignore some laws the rest of us must follow.

This is such a depressing story that I’ll close today with this bit of humor about bureaucracy in the Golden State.

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