Politics and the US Economy

[RightField]

A Labor Strike Against Economic Reality
By Steve Chapman

In 1977, Boeing was the target of a strike by the International Association of Machinists and Aerospace Workers, which represents its workers in Puget Sound, Wash. and Portland, Ore. The aircraft manufacturer had another strike in 1989. In 1995, workers went out for 69 days. In 2005, they struck again. In 2008 ... well, you see the pattern.

Strikes are an expensive luxury. The last one, which went on for nearly two months, was estimated to cost Boeing more than $2 billion. "Based on previous strike experience," reported The Seattle Times, "Boeing will not recoup that money for many years."

At some point, a light bulb went on in the heads of those running the company: If we can't avoid union walkouts, we can't make aircraft deliveries. If we can't make aircraft deliveries, we don't get paid, we alienate customers and we endanger our livelihood.

After the 2008 walkout, Virgin Atlantic founder Richard Branson voiced exasperation. "If union leaders and management can't get their act together to avoid strikes," he said, "we're not going to come back here again. We're already thinking, 'Would we ever risk putting another order with Boeing?' It's that serious."

Something had to be done. Boeing tried to address the problem with the machinists, asking for a long-term no-strike agreement, but the union showed no interest, and the idea died.

End of story? Not quite. In 2009, the company had to decide where to open a second production line for its 787 Dreamliner. It could have put it where labor troubles were practically guaranteed. Instead, it built a plant in South Carolina, which is scheduled to go on line this summer with 1,000 non-union workers.

The state offered tax incentives and a hospitable commercial environment. But a Boeing executive said at the time, "The overriding factor was not the business climate. And it was not the wages we're paying today. It was that we cannot afford to have a work stoppage, you know, every three years."

That may strike you as a blinding flash of the obvious -- not to mention a choice fully within the discretion of any company functioning in a competitive marketplace, which penalizes idleness. But apparently not.

Last month, the National Labor Relations Board, a federal agency, filed a complaint arguing that Boeing broke the law by taking account of possible strikes in making its decision. This, it said, amounted to illegal retaliation against the machinists union.

It wants an NLRB administrative law judge to force the company to transfer the production back to Washington. And it may get its way.

No, you are not hallucinating. If the NLRB succeeds, a federal official will command a private corporation it may not produce in one place and must produce in another. Never mind what makes business sense.

This is a radical departure for the agency. "It is highly unusual," noted The New York Times, "for the federal government to seek to reverse a corporate decision as important as the location of a plant."

No kidding. It rests on the premise that this company is obligated to remain hostage to a contentious union. It assumes that government officials are entitled to dictate the choices of people whose capital is at risk. And you wonder why Ayn Rand's novel "Atlas Shrugged" is selling briskly?

Boeing adamantly denies moving production because of strikes or unions. But even if it was doing something so vicious as to protect itself against recurring labor disruptions, it ought to have that right.

William Gould, a Stanford law professor who was appointed to head the NLRB by President Bill Clinton, has his doubts about this complaint. "It's perfectly reasonable for a company to want to avoid strikes," he told me.

In his view, the board's general counsel "is wrong when he says the company can't divert work from a union facility when it can't get a no-strike clause, so long as it offers some other means to resolve differences. I don't infer from that anti-union animus, which is prohibited."

Boeing was merely recognizing economic rationality by locating where it can build planes without the burden of a militant union and frequent strikes. The NLRB may be wrong about some things, but it is right to believe that if the needs of labor unions are to be served, economic rationality will have to take a back seat.

 

[mercury14]

RightField, you realize you're violating copyright laws by reposting articles in their entirely, right? Aside from the ethics and legality of it, it makes you look incredibly weak.

 

[RightField]

RightField, you realize you're violating copyright laws by reposting articles in their entirely, right? Aside from the ethics and legality of it, it makes you look incredibly weak.

Get over yourself. It's a porn board. I'll remember the proper etiquette next time I publish in National Affairs.

 

[Luk]

Get over yourself. It's a porn board. I'll remember the proper etiquette next time I publish in National Affairs.

Funny you didn't address the "incredibly weak" comment.

 

[RightField]

Funny you didn't address the "incredibly weak" comment.

Not worth commenting on.

 

[RightField]

RightField, you realize you're violating copyright laws by reposting articles in their entirely, right? Aside from the ethics and legality of it, it makes you look incredibly weak.

By the way, welcome back. How was prison?

 

[Luk]

Not worth commenting on.

By the way, welcome back. How was prison?

Incredibly weak.

 

[RightField]

Incredibly weak.

Go for it.

Governments Are The Primary Creators Of Systemic Risk
May. 16 2011
By CHARLES KADLEC

The greatest lesson of the still young 21st century is proving to be that governments are the primary source of systemic risk to the economy, our standard of living, and our liberty.

The latest case in point is the European government debt crisis, with Greece once again running out of money and threatening to trigger yet another financial crisis. The government’s debt now totals more than 150% of its GDP, and continues to grow. Last year’s bailout by other European governments was supposed to give it the time needed to reduce its budget deficits so that next year Greece could roll over its maturing debts, as well as finance additional deficits at interest rates under 6%. However, the government’s austerity plan of tax increases and budget cuts has not reduced current or projected government deficits because the economy in 2010 contracted by 4.5% and the unemployment rate jumped to 15%.

The combination of a contracting economy and rising debt levels has driven the market yield on Greek two years notes to near 25% and on its 10-year debt to around 15%. Since these loans are in euros, rates this high reflect the growing risk the people of Greece will not be able to make good on their collective debts. They also effectively shut the government out of the capital markets. Last week, S&P downgraded its rating on Greek debt to B from BB-, well into junk bond territory.

The downgrade reflects the increasing possibility that Greece will restructure its debt by forcing current debt holders to accept longer maturities, or do what demonstrators in the streets of Athens are demanding, which is to force its creditors to take a loss on their loans.

Normally, this would be a matter between a debtor and its creditors. However, European Central Bank (ECB) Executive Board Member Juergen Stark warns that the effects of restructuring “could overshadow the effects of the Lehman bankruptcy,” which is associated with the beginning of the 2008 financial crisis.

At the heart of that financial crisis were government policies including Federal Reserve efforts to manipulate the economy by keeping interest rates artificially low and a weak dollar policy that fueled the housing bubble, federal government rules and regulations that de facto required banks to make loans to high risk borrowers, and two government sponsored enterprises, Fannie Mae and Freddie Mac, who stood ready to purchase hundreds of billions of dollars of sub-prime mortgages if only Wall Street could figure out how to turn them into high grade bonds.

In the case of Greece, government actions and regulations also lie at the heart of what threatens to be a European financial crisis.

Greek social security funds hold nearly two-thirds of their liquid assets in government bonds. Thus, any default would undermine these funds’ ability to meet their obligations to pay promised health and pension benefits. Such an outcome understandably would create massive political unrest that could reduce government revenues and the government’s ability to make good on its debts.

This risk is amplified by special rules created by politicians that encourage banks to lend freely to governments.

Here’s how it works. Governments require banks to hold capital against the loans that they make, anticipating that in the normal course of business, some of the loans will not be repaid. The riskier the loan, the more capital that needs to be held in reserve.

However, under international rules negotiated by government representatives through the Bank for International Settlements (BIS), government loans fit into a special category that has a 0% risk requirement. That means European banks do not have to hold any reserves against loans they make to European governments. That’s right, politicians implicitly promised banks that governments would never default. And, given the opportunity to make “risk free” loans that require no capital commitment, bankers purchased mountains of government debt.

According to Reuters, Greek banks own nearly 60 billion euros ($84 billion) of Greek government debt, and would almost certainly need additional capital and potentially a government bailout in the event of a government default.

In addition, the European Central Bank has increased the risk of systemic failure by becoming one of Greece’s largest creditors. As reported by the New York Times, J. P. Morgan estimates that the ECB owns 40 billion euros of Greek debt. In addition, it has lent 91 billion euros to Greek banks, with much of that backed by Greek government bonds.

That means any Greek default would cost the ECB billions of euros in losses and potentially impact the value of the euro, disrupting European and international financial markets, and the conduct of European monetary policy.

In a television interview last Friday, ECB Vice President Lucas Papademos warned: “…the adverse consequences both on the banking system in Greece as well as on financial stability in the euro area as a whole can be far reaching and undesirable. So all in all, I think that Greek debt restructuring should not be on the agenda.”

One possible “far reaching and undesirable” consequence of such a disruption to European financial markets would be follow-on defaults by Ireland, Portugal, Spain and Italy. According to AEI Scholar Desmond Lachman, the combined debt of the first four countries alone is about $2 trillion, a large portion of which is held by European banks. As a consequence, a write-down of 30% of that debt could lead to a European financial crisis not unlike that which struck the U.S. banks from sub-prime mortgages.

Thus, the systemic risk created by the political class has put the citizens of Europe on the hook for irresponsible levels of government spending. Wealth producers are faced with the lose-lose choices of bailing out governments, bailing out bankers who were induced into buying government debt, or suffering the economic consequences and losses associated with widespread bank failures.

The brewing European debt crisis demonstrates again that the greatest source of systemic risk is believing politicians when they promise government guarantees are costless, and that elite public servants are capable of protecting us from systemic risks in the first place. The lesson is that giving governments more power over the economy and financial system is itself a source of potentially catastrophic financial and economic instability.

 

[garbage can]

RightField, you realize you're violating copyright laws by reposting articles in their entirely, right? Aside from the ethics and legality of it, it makes you look incredibly weak.

Forgetting the copyright laws and shit, do you think Boeing has the right to open a plant in SC???

And, how does RightField look incredibly weak by posting this article?

 

[RightField]

Hey, did you get your Obamawaiver yet? There was an article in the paper today that pointed out the irony of many retirement homes, particularly the smaller providers, need Obamawaivers. Government by favortism. What's the going price in political donations these days for an Obamawaiver? Can I get one for other types of taxes too?

Wielding Waivers as Weapons
By Mona Charen

Former House Speaker Nancy Pelosi's plea that Congress would have to pass the 906-page Patient Protection and Affordable Care Act in order to "find out what's in it" has become an instant classic in the annals of dysfunctional government. But in the months since the bill's passage, as the Department of Health and Human Services has parceled out waivers, something else has become clear: We may never know what's in it.

It's not because the legislation is so long or so complicated -- though it is staggeringly prolix and stupefying in complexity. If it were only that, time would reveal the intricacies and experts would parse the meaning.

No, the reason we may never really know what's in it is because it lodges such tremendous discretion and power in the Department of Health and Human Services that we can never really be sure how government decision-makers will interpret it. In at least 700 separate instances, the legislation says that the Secretary of Health and Human Services "shall have discretion" to make rules implementing the law's often vague requirements.

On May 13, the Obama administration announced the approval of 204 new waivers from compliance with the PPAA (Obamacare). That brings to 1,372 the number of waivers HHS has granted in the 14 months since the law's passage. The waivers are temporary, designed to prevent wholesale bankruptcies of insurance and other companies before most of the law's provisions take full effect in 2014.

"We are committed to making the waiver process transparent to the public," an HHS spokesman offered reassuringly.

But while the identities of those who have received waivers have been disclosed, the administration has so far declined to reveal the names of those whose waiver requests were denied. Nor has HHS explained its criteria.

There are rumblings of suspicion that HHS has shown favoritism -- labor unions have received some 26 percent of waivers while comprising only 12 percent of workers. As Rep. Fred Upton, R-Mich., chairman of the Energy and Commerce Committee remarked, "What does it say about the feasibility of the health care law when the administration needs to exempt over 1,000 health plans from its own law?"

A few wags have suggested that the HHS grant the rest of the country a waiver and be done with it. But the implications of what Professor Richard Epstein has called "government by waiver" aren't funny. As Congress has ceded more and more power to regulatory agencies, the opportunities for abuse of power multiply. Writing in National Affairs, Epstein notes that among the companies and entities that successfully sought waivers from Obamacare's provisions were PepsiCo, Foot Locker, the Pew Charitable Trusts, many local chapters of the Teamsters, the United Food and Commercial Workers union, and numerous public-employee unions.

But, asks Epstein, "(W)hat about employers who do not have the resources to navigate the waiver process? What about those lacking the political connections to make their concerns heard in Washington? And what happens when the one-year waivers run out? Will they be renewed? Under what conditions? And what rights will insurers have to waive then in order to avoid going out of business?"

The world of Obamacare is no place for the little guy.

The danger of waiver power is that it will be used differentially, giving one private entity a competitive advantage over another. The company denied a waiver can bring suit -- but litigation is expensive and slow.

Additionally, companies may fear government retaliation: "It is no accident that it is often public-interest groups or patient groups that take on the FDA, for instance. It is simply too risky for a pharmaceutical company with multiple applications before the agency to challenge one action if it is vulnerable to a government-induced slowdown on another," writes Epstein.

Nor have the courts been particularly solicitous of those who challenge the regulatory state. Epstein observes with regret that "Most judges evince great faith in the administrative state, so that the abuse of discretion that lies at the heart of the waiver problem is, to them, a matter best sorted out by administrative expertise -- a perpetually overestimated pool of wisdom."

Because there are so few avenues of recourse when we live under a government by waiver, we are forced, as Epstein warns, to trust in the good judgment of bureaucrats and elected officials: "The fate of our rights and liberties is left to the wisdom and discretion of individuals; we are therefore governed by men, not by laws."

In Marbury v. Madison, Justice Marshall wrote: "The government of the United States has been emphatically termed a government of laws, and not of men. It will certainly cease to deserve this high appellation if the laws furnish no remedy for the violation of a vested legal right." It will also cease to deserve that "high appellation" if we submit to the unreviewable discretion of agencies.

 

[Luk]

Forgetting the copyright laws and shit, do you think Boeing has the right to open a plant in SC???

And, how does RightField look incredibly weak by posting this article?

Here, let me show you...

Hey, did you get your Obamawaiver yet? There was an article in the paper today that pointed out the irony of many retirement homes, particularly the smaller providers, need Obamawaivers. Government by favortism. What's the going price in political donations these days for an Obamawaiver? Can I get one for other types of taxes too?

When sheep listen to too much radio talk shows and can't think for themselves, they use idiotic words like "Obamacare" and "Obamawaiver."

See how easy that was?

 

[RightField]

Here, let me show you...




When sheep listen to too much radio talk shows and can't think for themselves, they use idiotic words like "Obamacare" and "Obamawaiver."

See how easy that was?

I still admire you for starting a business and hiring people.

"Obamacare" and "Obamawaiver" are both terms used widely in the press and have become general descriptors of two major aspects of our new healthcare system. Time to address content.

 

[Luk]

I still admire you for starting a business and hiring people.

"Obamacare" and "Obamawaiver" are both terms used widely in the press and have become general descriptors of two major aspects of our new healthcare system. Time to address content.

If the press is mostly "Liberal", how can you say those terms are widely used in the press? And I never address anything that uses those idiotic terms. No one with a lick of intelligence would.

 

[eyer]

Time to address content.

Hope your watch is perpetually powered...

 

[garbage can]

Here, let me show you...




When sheep listen to too much radio talk shows and can't think for themselves, they use idiotic words like "Obamacare" and "Obamawaiver."

See how easy that was?

Oh, kind've like tea bagger and nazis huh. WTF

 

[unregistered]

 

[Peregrinator]

Let's don't leave out Astroturfing.

Interesting that you bring that one up. Is it seen as disingenuous like Luke's and Garby's examples? I've always heard it used in a sort of factual/descriptive way.

Also, I had no idea it had been around so long; according to the wiki entry, it's "said to have been used first in this context by former US Senator Lloyd Bentsen of Texas in 1985." I didn't bother to check the footnote, so who knows, but still, it seems like it's become prevalent just in the last few years.

 

[unregistered]

 

[Peregrinator]

The Obama White House revived it not to long ago.

Oh. It seems to have been in common usage for longer than that. I think it's a good description of what it purports to describe, though, whoever is using it.

 

[unregistered]

 

[Peregrinator]

It wasn't really prominent for many years until David Axlerod revived it while back and Pelosi used it not to long ago as well.

Okay. I wonder why the Dems seem to like it better. Do you think it reflects some difference between the parties?

 

[unregistered]

 

[Luk]

Oh, kind've like tea bagger and nazis huh. WTF

Let's don't leave out Astroturfing.

Have either of you ever seen me type any of those words? No? Good. Now try something else.

 

[mercury14]

And, how does RightField look incredibly weak by posting this article?

Rightfield looks incredibly weak by being unwilling to articulate any of his own thoughts. Hell, he can't even articulate other people's thoughts which is why he posts dozens upon dozens of copyrighted articles in their entirety.

A brighter person would be able to organize his sources and formulate some sort of thesis. But instead we have a person who's either incredibly lazy, incredibly dim, or most likely both, who is content to leave us a towering stack of other people's partisan crap and calls it a day.

That, Mr. Can, is why Rightfied is and always has been incredibly weak.

 

[RightField]

Character assasination, the last refuge of a scoundrel. Don't you have anything better than that? Pretty weak on your part I'd say.