The ExIm Bank’s putative purpose is to finance purchases of U.S. exports and make American products more globally competitive. In practice, the agency finances investments by big businesses that primarily benefit foreign companies and governments, much like the U.S. Agency for International Development.
France’s TotalEnergies’ Mozambique LNG export project is an example. Mozambique boasts large natural gas reserves off its coasts, but the East African country suffers from conflict and instability, which has spooked private investors. Total wants the U.S. and other governments to finance its $20 billion LNG project to reduce its risk.
The ExIm Bank approved a $4.7 billion loan for the project in 2020 on the rationale that China and Russia might otherwise finance the deal. But this justification strays from the agency’s stated mission.
Rising prices should have warned the Fed that inflationary pressures were building again, yet policymakers plowed ahead with interest rate cuts. They didn’t seem to be responding to economic fundamentals; they were responding to Wall Street’s demands for easy money.
The deteriorating fiscal outlook, which Congress primarily owns, won’t help fight inflation either. The Congressional Budget Office’s 10-year projections from January show the national debt growing over the next decade by $23.9 trillion. The recent House Republican budget would add another $4 trillion, only part of which will be offset with investment-driven economic growth.
More borrowing means higher interest costs on the national debt, which are already skyrocketing and project to soon exceed $1 trillion per year. As Hoover Institution economist John Cochrane has pointed out, when the Fed raises interest rates to combat inflation, it also raises these interest costs on the debt.
Mike Solon calls on Congress to protect Americans from bracket creep. A slice:
That several major tax thresholds aren’t indexed for inflation accounts for the inflation-fueled fiscal windfall. The income thresholds for taxing Social Security benefits aren’t indexed. Neither is the child tax credit, the $10,000 cap on the deductibility of state and local taxes, or the investment income threshold above which the ObamaCare surtax is applied. The basis used to measure and tax capital gains has never been indexed. As a result of all this, even if workers and investors saw their earnings rise by enough to offset inflation during the Biden administration, their real, after-tax incomes fell.
The early days of the Reagan administration hold a lesson for today’s congressional Republicans. Four decades ago, inflation was a major factor driving federal revenue. From 1973-81, the U.S. endured 9.2% average annual inflation. With an unindexed tax code that contained 33 income-tax brackets, federal revenue swelled as rising nominal income pushed families into higher tax brackets solely due to inflation. This process was called “bracket creep.” A Congressional Budget Office report in 1980 described it: “During much of the past decade, many taxpayers have found themselves paying larger fractions of their incomes to the federal government in income taxes.”
Another news outlet expressing an interest in promoting civil liberties and economic freedom? Great! The more the merrier. Freedom, after all, does not suffer from a lack of enemies within the mainstream media. News coverage from a progressive and even ostensibly neutral bent often focuses on, say, the purported harms of making any cuts to bloated government; see, for instance, a recent news story in The Washington Post that explained how devastating staffing reductions mandated by the Department of Government Efficiency (DOGE) had made it impossible to unlock the public restrooms at Yosemite National Park. A news publication with a libertarian-friendly mission, on the other hand, might have asked whether the government bureaucracy within the National Park Service was intentionally starting with the most painful cuts of all in order to sap public enthusiasm for the cause of limiting government—something Georgetown University law professor Randy Barnett described as “malicious compliance” in a recent interview on Reason‘s Just Asking Questions.
Benjamin Zycher exposes the economic flaws in Lina Khan’s and the F.T.C.’s antitrust action against John Deere. Two slices:
Less than a week before the end of her tenure as chairman of the Federal Trade Commission, Lina Khan and the Attorneys General of Illinois and Minnesota filed a federal lawsuit against John Deere, arguing that Deere “has throttled the ability of farmers and independent repair providers (‘IRPs’) to repair Deere equipment, leaving farmers wholly reliant upon Deere’s network of authorized dealers (‘Deere dealers’) for many key repairs.”
Khan fancies herself an economist and expert on industrial organization by virtue of a law degree and a deeply flawed 2017 article in the Yale Law Review. It can surprise no one, therefore, that throughout her tenure as FTC chairman, Khan consistently promoted arguments and economic “analyses” so silly that they were roundly criticized as such by a broad spectrum of actual economists.
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Let us begin with the argument that “monopoly power” in the repair market yields “additional profits” for Deere. Khan and the AGs cannot believe that buyers of Deere equipment are unaware of the structure of the repair market. Accordingly, the more expensive and difficult the prospective repair process, the less that buyers of Deere equipment will be willing to pay for that equipment. After all, suppose in a conceptual extreme case that such repairs were impossible; were something to go wrong with, say, a tractor recently purchased, the buyer would be out of luck, stuck with a useless tractor.
In that extreme case buyers of Deere equipment would not be willing to pay prices much higher than zero. The more general reality is that a repair market that imposes unnecessary (that is, inefficient) costs on buyers reduces the demand — the price that Deere can command — for its equipment. The Khan/AGs argument is wholly at odds with standard economic analysis. It is nonsensical because the central underlying premise is that manufacturers can increase their profits by making life more difficult for their customers. Seriously?
This warning from Arnold Kling is wise.
Bob Graboyes writes with historical perspective about disinformation.
