Category Archives: Business

Worse Than I Thought

And I thought that card check was already pretty bad:

Under EFCA, the terms set by the arbitrator will be the furthest thing from a “contract.” It won’t be an agreement between management and labor. Rather, wages, hours and terms and conditions of employment will be dictated by a government appointed arbitrator. The mandate will be binding on the parties for two years. Neither the company nor the employees can reject it (At least when the Central Committee set the wages for tractor assembly workers in the Leningradskaya oblast there was always the possibility that the wages might change later that afternoon).

Currently, if employees don’t like the tentative agreement negotiated between union leaders and management the employees can vote it down and instruct their leaders to go back to the bargaining table to get a better deal. Not so under EFCA. If the employees don’t like the arbitrator’s decree of a 2% wage increase, they’re stuck. Similarly, if the company can’t afford the arbitrator’s command to pyramid overtime, the company’s stuck. The consequences aren’t difficult to imagine.

This is a small business owner’s nightmare. As is the health insurance mandate. Obama will be a disaster, economically, at least if the Democrats get enough votes to block filibusters in the Senate.

[Update a couple minutes later]

Here’s more on the job-destruction potential of Obama’s health-care plans, from that bastion of right wingery, the New York Times:

the penalty in Massachusetts is picayune compared with what some health experts believe Senator Barack Obama, the Democratic presidential nominee, might impose as part of his plan to provide affordable coverage for the uninsured. Though Mr. Obama has not released details, economists believe he might require large and medium companies to contribute as much as 6 percent of their payrolls.

That, Mr. Ratner said, would be catastrophic to a low-margin business like his, which has 90 employees, 29 of them full-time workers who are offered health benefits.

“To all of a sudden whack 6 to 7 percent of payroll costs, forget it,” he said. “If they do that, prices go up and employment goes down because nobody can absorb that.”

Writ large, that is one of the significant concerns about Mr. Obama’s health plan, which like this state’s landmark 2006 law would subsidize coverage for the uninsured by taxing employers who do not cover their workers. And it is a primary reason that so-called play-or-pay proposals have had an unsteady history for nearly two decades.

This is 180 degrees from the direction that we need to go. Most of the problems of the current health-care system stem from its being tied so much to employment, which is an artifact of wage controls during World War II. The first critical step in fixing it is to decouple it from the job, so that plans are portable, and people are more connected with choosing their provider. McCain’s plan isn’t perfect, but it’s a big step in the right direction, and the demagoguery of the Democrats on this issue (as on most issues) has been shameful.

More Margin Problems

The new littoral ship that Lockheed Martin is building for the Navy is four percent overweight:

The Navy and Lockheed already have a plan to remove nearly all the additional weight from the ship over a period of about six months once the new ship, which is named Freedom, gets to Norfolk, Virginia, in December, said the sources, who asked not to be identified.

As I said, margin, margin, margin. If you miss your weight target by that much on a launch system, it’s bye-bye payload. In this case, it simply puts the ship at risk in combat.

As the emailer who sent this to me asks, “I wonder if Lockheed will remove excess weight from Orion at no additional cost.”

What We Should Really Be Angry About

I fully agree with Iain Murray:

While conservatives are angry about a number of things at the moment, they should be at least as angry that the Congressional Democrats who helped stoke the mortgage crisis are getting away with blaming everyone else for it. Today, Senator Chris Dodd, the prime recipient of GSE lobbying funds and proud holder of a sweetheart mortgage from Countrywide, is holding hearings where the witnesses will blame everyone but Dodd, Barney Frank and their cronies. Republicans asked to invite witnesses but were barred from doing so.

The notion that this mess is the fault of Republicans, and “deregulation” and the free market, is one of the biggest frauds ever perpetrated on the American people. And as a result, we could be heading toward both electoral and economic disaster.

[Update early afternoon]

Peter Schiff says don’t blame capitalism:

Just as prices in a free market are set by supply and demand, financial and real estate markets are governed by the opposing tension between greed and fear. Everyone wants to make money, but everyone is also afraid of losing what he has. Although few would ascribe their desire for prosperity to greed, it is simply a rose by another name. Greed is the elemental motivation for the economic risk-taking and hard work that are essential to a vibrant economy.

But over the past generation, government has removed the necessary counterbalance of fear from the equation. Policies enacted by the Federal Reserve, the Federal Housing Administration, Fannie Mae and Freddie Mac (which were always government entities in disguise), and others created advantages for home-buying and selling and removed disincentives for lending and borrowing. The result was a credit and real estate bubble that could only grow — until it could grow no more.

Prominent among these wrongheaded advantages are the mortgage interest tax deduction and the exemption of real estate capital gains from taxable income. These policies create unnatural demand for home purchases and a (tax-free) incentive to speculate in real estate.

Similarly, the FHA, Fannie and Freddie were created to encourage lending by allowing primary lenders to turn their long-term risk over to the government. Absent this implicit guarantee, lenders would probably have been much more conservative in approving borrowers and setting interest terms, and in requiring documentation of incomes and higher down payments. Market forces would have kept out unqualified buyers and prevented home-price appreciation from exceeding the growth in household income.

Read the whole thing.

I disagree, though that the solution is to take away the home-mortgage interest deduction and the capital gains break. It would be much better to restore the deduction for all interest (as it is for business, and was for individuals until the tax “reform” in 1986). It’s not fair to have to pay tax on interest earned as income, but not be able to deduct interest paid.

Also, rather than treating houses preferentially, peg all capital gains taxes to inflation, to eliminate having to pay a tax when the actual value hadn’t increased.

Frustrated At McCain

How many times is he going to let Obama get away with this bullshit that he’s going to cut taxes for people who don’t pay income taxes? He’s done it twice now. It’s a frickin’ handout and redistribution. As I said, John McCain could win this election if he weren’t John McCain.

Sounding a little better on spending cuts. Talking about ending ethanol subsidies and tariffs on sugar (writing off Iowa…). He should have point out how he was going to veto spending bills that Bush wouldn’t (another missed opportunity). Another missed opportunity was to point out that while earmarks are small, it’s how Congress logrolls other members on big spending bills.

[Update]

McCain is actually doing much better now. But he really should stop talking about the “overhead projector in Chicago.” People like planetariums, and it makes him look clueless about science.

[Update]

McCain just pointed out that Obama’s solution (increase taxes, restrict trade) was Hooverlike. This is good in two ways: it helps separate him from Republicans and it’s true.

[Update]

McCain is on fire on health care. Obama seems to think that having an employer providing health care is a wonderful thing, and that everyone agrees on that. But McCain had a great (non?)-Freudian slip. He called his opponent “Senator Government.”

[Update]

The discussion on Roe almost veered into a discussion on federalism. But not quite. But McCain went after him on his vote on the bill to allow failed aborted babies to die. And Obama is obfuscating on his vote.

[Final update]

Not a great debate for McCain, but it was his best. And he’s not out of it.

What was missing? Gun control. It would have been a big issue in key states.

An End To Redundant Inefficiency

John Jurist writes (or at least implies) that there’s just too much competition in the suborbital market:

An approach I favor is forming a university consortium analogous to those that design, build, and operate large cooperative research assets, such as telescopes and particle colliders. That consortium could develop a suborbital RLV or even a nanosat launcher to be used by consortium members for academic projects. Since the consortium would design and develop the vehicles, participating universities would be more likely to use them for student research under some type of cost-sharing arrangement with federal granting agencies.

Dr. Steve Harrington proposed something a bit different recently:

If you took all the money invested in alt.space projects in the last 20 years, and invested in one project, it could succeed. More underfunded projects are not what we need. The solution is for an investment and industry group to develop a business plan and get a consortium to build a vehicle. There is a lot of talent, and many people willing to work for reduced wages and invest some of their own company’s capital. Whether it is a sounding rocket, suborbital tourist vehicle or an orbit capable rocket, the final concept and go/no go decision should be made by accountants, not engineers or dreamers (Ref. 8).

I would concur with Dr. Harrington’s final remark except I would expand the decision making group to include management and business experts nominated by the consortium members with whatever technical input they needed.

Yes, good idea. After all, we all know that it’s a waste of resources to have (for example) two grocery stores within a few blocks of each other. They could dramatically reduce overhead and reduce costs and prices if they would just close one of the stores and combine forces. In order to assure continued premium customer service, they could just assemble a board of accountants, and finest management and business experts to ensure that the needs of the people are met.

In the case of the RLV development, the consortium could hire the best technical experts, and spend the appropriate amount of money up front, on trade studies and analyses, to make sure that they are designing just the right vehicle for the market, since it will be a significant investment, and the consortium will only have enough money to do one vehicle development. They will also have to make sure that it satisfies the requirements of all the users, since it will be the only available vehicle. This will further increase the up-front analysis and development costs, and it may possibly result in higher operational costs as well, but what can be done? It’s too inefficient to have more than one competing system. As John’s analysis points out, we simply can’t afford it.