Over the past year, the U.S. government has acquired an unprecedented investment portfolio, including a majority stake in GM and a large ownership stake in Chrysler. These investments have raised a plethora of difficult policy challenges. One of the most important is the ongoing risk that private business decisions may get transformed into public policy issues. Or, put more bluntly, that policymakers might use the ownership stakes as justification for and leverage to pursue their own policy agendas, regardless of whether they would be good for the companies.
Yesterday’s newspapers provided an excellent example of this risk. Some lawmakers want to use legislation — the annual appropriations bill that funds financial services and general government — to restore the franchise agreements of several thousand dealers who were terminated as part of the restructuring of GM and Chrysler. It’s easy to see how such a proposal can gain traction in the House of Representatives. Every terminated dealership will get a sympathetic hearing, at a minimum, from their local representative. But such meddling is not in the interests of GM and Chrysler, nor the nation at large.
Happily, the Obama Administration has come out against these efforts. In a Statement of Administration Policy on the appropriations bill released Wednesday, the Administration wrote:
Continue reading “Standing Firm on Auto Dealers”
On Friday, the House of Representatives passed its climate change bill by a slim margin. The bill’s key feature is a cap-and-trade system for greenhouse gases. That system would set national emission limits and would require affected emitters to own permits (called allowances) to cover their emissions.
The number one thing you should know about this bill is that the allowances are worth big money: almost $1 trillion over the next decade, according to the Congressional Budget Office, and more in subsequent decades.
There are many good things the government could do with that kind of money. Perhaps reduce out-of-control deficits? Or pay for expanding health coverage? Or maybe, as many economists have suggested, reduce payroll taxes and corporate income taxes to offset the macroeconomic costs of limiting greenhouse gases?
Choosing among those options would be a worthy policy debate. Except for one thing: the House bill would give away most of the allowances for free. And it spends virtually all the revenue that comes from allowance auctions.
As a result, the budget hawks, health expanders, and pro-growth forces have only crumbs to bargain over. From a budgeteer’s perspective, the House bill is a disaster.
The following table illustrates how much revenue the bill would raise and compares it to the alternative of auctioning all the allowances:
Continue reading “Big Money in Cap-and-Trade”
Catherine Zeta-Jones has an important message for policymakers who want to help consumers make better financial decisions.
Let’s go to the video:
I should emphasize that the message is not that economists are bow-tie-wearing geeks who should be sprayed with garden hoses. That may be true, but it isn’t CZJ’s message to policymakers.
No, the special message of the T-Mobile ad is that … Continue reading “Catherine Zeta-Jones & Consumer Finance”
Some good items elaborating on topics I’ve discussed in the past week:
Google will likely face close scrutiny from the Obama administration. Indeed, it is already the subject of at least three separate antitrust reviews. Here are three ways Google will try to defend itself.
As Jeff Horwitz notes in the Washington Post this morning (“Google Says It’s Actually Quite Small“, previously posted on Slate), the search giant will likely face close scrutiny from the Obama administration. Indeed, Google is already the subject of at least three separate antitrust reviews.
How will Google try to defend itself?
As Horwitz reports, Google will undoubtedly employ two classic defenses:
Defense 1. Being a monopolist isn’t illegal. If firms achieve market dominance through “superior skill, foresight, and industry” (as Justice Learned Hand put it decades ago), that’s fine under our system. We want to reward firms that gain market share by being innovative and delivering value to customers.
Continue reading “Google’s Defense”