The Airline Industry is a Gigantic Government Boondoggle

Airline Industry

The Airline Industry in the United States was largely brought into existence and continues to be propped up by your tax dollars. It now looks like another $54 billion is going to be spent to keep it going. Yikes. Why are we propping up an industry that has largely failed to be profitable since its inception?

To fully understand how much of your tax dollars have gone into the airline industry we have to go back to the beginning. The Contract Air Mail Act of 1925 essentially allowed airlines to exist and they would not have turned a profit if not for government contracts. Since then the airline industry has continued to be largely dependent on the government for survival.

Without government contracts, military and government passengers paid for by you, employees trained at taxpayer expense, military breakthroughs in aviation, funding for research, the Essential Air Service, propping the industry up after the 9-11 terrorist attacks, ongoing payments to maintain staff and service airports, the industry would not exist in its current form.

In addition, the result of all these tax dollars put into the airline industry by the government was the utter destruction of the profitable and highly used passenger rail system that largely no longer exists in the United States but is functioning with great success in almost every other country in the world.

So, now, after all this, we are being asked to once again save the airline industry from bankruptcy. Hey, how about we let the unprofitable airlines fail, allow autonomous cars to transport us relatively short distances on our own schedule, and rebuild the passenger rail system without tax dollars? Those airlines that can run profitably without taxpayer dollars will do so.

Your tax dollars are the only reason many small airports across the country exist. That’s what the Essential Air Service act ensures. The government keeps small airports open even though they have no hope of ever being financially independent.

We never should have used tax payer dollars and government mandates to create the airline industry and now, all these years later, we’re continuing to pay for that mistake. Let’s put a stop to it, now is the opportunity to do so.

The mantra of a Libertarian: Let them fail.

Tom Liberman

Garrison Brothers Whiskey and Governor Perry

Garrison Brothers Whiskey

I attended an event at the whiskey place down the street, Gamlin Whiskey House, to learn about Garrison Brothers Whiskey and during the talk found yet another reason to hate government. One of the Garrison brothers mentioned that it was illegal to distill whiskey in Texas when he and his brother started up their business. Only the personal intervention of Governor Perry allowed it to take place. You’d imagine I’m happy about that but you’d be wrong and I’m here to explain why.

Apparently, the Garrison lads were learning how to distill in those early years but not actually selling any product. They knew what they were doing was illegal in the state of Texas but nobody really cared as they weren’t in a commercial business.

The distillery is located in Hye, Texas which is not far from the state capital of Austin. This means that Perry happened across it one day. Perry also happens to be a whiskey drinker. Imagine, if you will, that the Garrison Brothers distillery was not located near Austin, that Perry was a teetotaler, that Perry’s wife had bad romance with one of the brothers. Where would Garrison Brothers be then? That’s the root of the problem.

Yes, it’s nice that the government of Texas allowed the Garrison Brothers to legally distill and sell their whiskey. However, it’s awful that the government is in a position to allow or disallow such activity. The Garrison Brothers should be able to distill their whiskey and sell it with or without government support. You only have to look at the horse meat industry to understand the government can put anyone out of business, at any time, with the stroke of a pen.

Certainly, the government has the right to obtain a sample of the whiskey, send it to a laboratory, analyze it, and publish the result of that analysis. Let the public know if the whiskey has so much alcohol that it is toxic. If the whiskey is toxic then the law enforcement arm of the government can spring into action.

Whiskey reviewers have the right to purchase the whiskey and assign it a grade and the government should be able to do the same thing.

The whiskey, you ask? It’s made with high desert water from Texas and local produce so it has a different overall feel than Kentucky or Tennessee whiskey. It is softer in the mouth and doesn’t have that immediate striking feel on the tongue and roof of the mouth but has a lingering and lovely flavor on the side of the mouth and down the throat.

My recommendation? Next time you go whiskey shopping, purchase a bottle. You might find it becomes a go to brand or you might not find it to your taste. That’s a choice for you to make, not the government.

Tom Liberman

Cheap Razor Blades Saved by the FTC

Cheap Razor Blades

******* UPDATE *****

Edgewell dropped their attempt to purchase Harry’s. Congratulations big government lovers, the FTC has saved us.

**** END ******

The Federal Trade Commission is attempting to save cheap razor blades by preventing Edgewell Personal Care from purchasing Harry’s. Harry’s sells such blades along with other products. The government apparently considers Harry’s an industry disrupter and feels the need to step in and prevent the sale, which the owner of Harry’s deems necessary because the company is not profitable.

Yay, the government has come to save my cheap razor blades. The original low-priced razor companies; Dollar Shave Club and Walker and Company, were already purchased by larger razor manufacturers leaving only Harry’s to compete against the giants.

Let’s examine what’s really happening here. Why is Harry’s not profitable to begin with? Maybe because they sell razors so cheaply? It’s entirely possible Harry’s and the other sellers planned, from the very beginning, to sell out to the big names in industry. The principals knew their companies weren’t going to be profitable but wanted the bonanza at the end of the tunnel. If that is the case, then the FTC is preventing them from achieving this goal. It is undeniably true the owners of Harry’s want to sell and they are being prevented from doing so by the government.

The broader question, from a Libertarian perspective, does preventing the sale of Harry’s leave consumers better off? Does the government have a role to play thanks to the Anti-Trust laws established in the Constitution of the United States?

The answer is not easy to deduce. It is absolutely true that Harry’s is an industry disrupter because they sell cheap razor blades significantly below the price of the established companies. However, if their goal was to sell out in the long run, this action by the FTC actually prevents other start-ups from doing the same thing. If they can’t sell their companies and they know their business model is unsustainable, they will not bother starting up in the first place. If, on the other hand, they could make a profit selling the cheap razor blades, they would stay in business without being absorbed by a larger company.

Now, it is possible they are just poorly run businesses and blades at that price could be sold for a profit but the evidence we’ve seen so far doesn’t indicate as much. Therefore, it seems to me, the government shouldn’t be propping up companies that sell products at prices that are unsustainable simply because such is good for consumers.

This is, in essence, socialism. It’s almost as if the government themselves are selling us cheap razor blades which they purchase with our tax dollars. If I didn’t know better, I’d guess the government will eventually bail out Harry’s so they can keep selling us cheap razor blades, but, nah, that could never happen.

Tom Liberman

Tariffs on Cheap Chinese Mattresses

Cheap Chinese Mattresses

In the last few years a product called Bed-in-a-Box has roiled the United States mattress making markets and allowed for the shipping of cheap Chinese mattresses. Prior to the Bed-in-a-Box model is wasn’t particularly cost effective to ship cheap Chinese mattresses to the United States and therefore companies here largely didn’t have to deal with such competition. Now they do and they’re doing something about, petitioning the government to save them.

The Federal Government is now claiming Chinese manufacturers are Dumping cheap Chinese mattresses on the United States and Commerce Department is going to institute tariffs of over 1000% on them. Dumping is an Anti-Trust issue and actually under the purview of the United States government so they do have an argument in this case. The Commerce Department claims the Chinese are dumping their mattresses at an unreasonably low level in order to drive out competition and create a monopoly from which they will eventually raise prices and lower quality.

There are very few instances of Dumping actually doing those things. Now, it is clear when a competitor comes in with equally high-quality product at a much lower price, the established businesses will suffer. The mattress firms petitioning the Commerce Department admit the cheap Chinese mattresses are of equal quality to their own so that’s not an issue. People are getting a product they want at a price they like, that’s good for consumers and I’m sure there are plenty of people sleeping on those mattresses every night and happily so.

The question becomes if the price is intentionally low in order to drive out competition and an eventual increase in price and lowering of quality is planned. I think we need look no further than Walmart to find the answer to this question. China has been inundating the U.S. market with cheap products for decades and, while they certainly have gained a stranglehold on many markets, they haven’t increased prices once they were established, they have kept prices low. This because manufacturing in China is cheaper for a variety of economic reasons that I won’t get into today.

There is nothing wrong with good prices. That’s a good thing for consumers. It’s obviously bad for the manufacturers of mattresses in the United States but that’s what healthy competition is all about, it’s the nature of capitalism. In this case, it can be, and has been, argued that the problem isn’t solely the cheap Chinese mattresses but Bed-in-a-Box competition from other U.S. firms as well. That the Commerce Department is intentionally raising prices for consumers simply to keep an industry afloat that could not otherwise compete.

Welcome to capitalism in the United States. Like higher prices and worse? Keep voting for such.

Tom Liberman

Congress Tries to Save Minor League Baseball

Minor League Baseball

A bi-partisan group of legislators from the United States Congress is angry that Major League Baseball is losing money on their Minor League System and wants to eliminate 42 teams. The reason members of Congress are mad is because the teams headed for oblivion are in their districts. So what? You might say if you have Libertarian leanings. What can Congress do? Plenty, and that’s the problem.

Congress has the ability to make or break a business by passing legislation and that is not what the Founding Fathers wanted and it is not a power Congress should have. What can they do? They might refuse to grant visas to international players, they might change broadcasting rights to not allow teams to have exclusive home territorial rights, they could even repeal Major League Baseball’s antitrust exemption. This is the power that Congress wields when we grant its members far more authority than they should have.

First off, I’ve railed against the antitrust exemption before, but it’s important to understand by allowing Congress to “help” baseball in the past, major league executives are de facto telling Congress they can hurt them in the future.

When Congress establishes a system which fast tracks talented athletes through the system while gifted computer analysists are held up, we are agreeing that Congress members can help one industry and hurt another. We then don’t get to be angry when Congress members changes their minds.

This is the root problem with granting government too much power in the first place. We generally give them such authority to right a wrong and often have the best intentions in mind. However, eventually someone comes into office who doesn’t agree with prior legislation but now they have been given the power to use that cudgel in any way they see fit. We cheered when they used it to help us but, oops, now they are going to hold it over our heads unless we do as they want. This is legislative tyranny, this is not freedom.

Baseball should be allowed to run their minor league baseball teams, largely, in any way they desire. If those minor league baseball teams are unprofitable, then so be it. It’s their call whether to keep them, it cannot be the job of government. And yet it apparently is. That’s how far we’ve slipped in this country. Our elected officials believe they should have the authority to tell Major League Baseball executives how to run their farm system.

It boggles the mind.

Tom Liberman

Cattle Ranchers Fight Plant Alternatives with Legislation

Cattle Ranchers Fight Meat Free

I just read an interesting story from the Wall Street Journal which highlights how the cattle ranchers are reacting to the threat of plant-based meat alternatives. The threat is real and the ranchers have every reason to be worried. One part of their fight illustrates what is wrong with our supposedly capitalistic financial system. The cattle ranchers have enlisted the help of federal, state, and local governments.

Competition is good. The fact that we now have plant-based alternatives to beef means there is a healthy competitive market. This is good for consumers. If cattle ranchers want our business, they have to improve their product and their prices. Sadly, that’s largely not the course they are taking.

Right here in my home state of Missouri a law was recently passed by legislators that prevents any plant-based product from having the word meat on its product packaging. Basically, you can’t have a product using the words “meat-like”, “meat flavored”, or “meaty”. This is not capitalism. It’s an attempt to use political machinations to stifle a competitor and it’s all too common in this country. It’s destroying capitalism.

The other thing the cattle ranchers are doing is sponsoring so-called studies that disparage their competitors by making largely unsupported claims about the healthiness of the product. This is also a threat to true capitalism. Meanwhile, the plant-based meat producers are being forced to hire their own team of lobbyists and studies to fight these political and underhanded tactics. Both sides are having their lobbyists buy expensive trips and who knows what else for legislators in order to woo them into passing or not passing legislation that will help or harm their industry. Doesn’t anyone else see a problem with this?

We look to politicians to legislate our competitors out of business and that is hurting this country although, unsurprisingly, our politicians are happy to take gifts and cash from business owners who crawl to the politicians and piteously beg for favors.

You have a competitor? Make a better product. Market it better. Work harder. That’s capitalism.

Tom Liberman

What to do about Useful Money from Bad People

Useful Money from Bad People

A rather despicable fellow named Jeffrey Epstein donated large amounts of useful money to any number of philanthropic causes and these gifts are now causing problems for those who received them. People are returning useful money and resigning from their positions, or being asked to do so. What I’d like to examine is the nature of philanthropic money in general.

Many of the people who donate to causes are not the greatest people in the world. Certainly, Epstein is viler than most but the question remains the same. As an example, let’s imagine you are the financial officer of a charitable organization and you have strong views on religion. Perhaps you are an Atheist or perhaps you are a Christian, Muslim, Wiccan, Jew, or Hindu. You are offered a large amount of useful money from someone who has a completely different belief system than you. Do you take that money knowing it will contribute to doing what you perceive to be good? What if the person has a criminal record? What if they are giving the money in order to improve their reputation because of some misdeeds in the past?

While my question is hypothetical the reality exists to the tune of billions of dollars in charitable donations. The events surrounding Epstein are forcing the financial operators of these organizations to ask themselves this very question. Should I refuse the donation because of the nature of the person who is giving it? Does the money, and the good that is done with it, override my concerns about the source? The money given by such a person intermingles with the money given by many better people and helps us fulfill our mission. Should I deny a child from Make a Wish their wish because I don’t like the person who is giving the money? Doesn’t that just hurt the child?

This is no idle question, if organizations turn down money from disreputable or unaligned donors, they will have less money to complete their mission. Those who would benefit instead go without. There are no easy answers here but I will not shirk from a conclusion simply because the question is complex and difficult.

I’ll happily tell you what I would do were I in charge of such a charity. Not that my decision is proper for anyone else, it is right for me and me alone.

I’d take the money from any source, even if Epstein were alive today in order to give it. I’d also be completely honest about my distaste for such a horrible person. I’d highlight the donation in my monthly and annual literature. I’d speak loudly to the stakeholders in the charity about why I took the money. About how the vile criminal Epstein was attempting to restore his reputation through the donation and that I wanted nothing to do with him other than cashing the check. I’d consider re-donating a goodly portion of it to help his many victims and organizations devoted to helping them and those like them.

Perhaps you disagree and I respect your right to do so. I can certainly understand why you would.

Tom Liberman

Fake Guacamole on the Rise Because of High Priced Avocados

Fake Guacamole

If you’re like me, you love guacamole and avocados. Yum. The price for avocados is skyrocketing and this is causing a lot of pain in restaurants who use the delicious fruit in various dishes. It strikes particular hard for Mexican establishments who tend to use it across a wide array of menu items but other restaurants are suffering as well. What do they do? Use other ingredients and create Fake Guacamole.

If you weren’t against tariffs because you’re a freedom loving Libertarian who promotes open and free trade then this phrase almost certainly hits somewhere most likely even more important, your stomach. The very words Fake Guacamole should be as rage inducing as trying to Get Over It. Ok, that’s a video game reference and sometimes I just can’t help but let my inner nerd out for all to see. Well, actually, it’s pretty much always on display but I won’t get sidetracked from my mission to free you from Fake Guacamole.

I’ve written about why protectionism hurts consumers far more than it helps those industries it purports to protect so I won’t reiterate here. The results are plain to see. Avocados cost a lot more today because tariffs have exacerbated a poor harvest and increasing demand. Today’s issue is the sort of punch to the gut that I think economic philosophy and Libertarian ideology don’t impart. You, the consumer, have most likely eaten Fake Guacamole in the last few months. You are certainly paying more for what avocados you still purchase although it’s almost certain you’ve cut down on that particularly delightful and healthy food.

This is the direct result of policies that promote protectionism and their attendant tariffs. How does it feel to know you’ve been tricked? That you’ve been served something under false pretenses because politically motivated economic policies forced the restaurant to do so in order to survive? Perhaps you think it’s worth it, that the trade off is worth the horror of fake guacamole. I disagree because I see no benefit from the policies of protectionism. They are merely political rallying points to inspire a group of citizens who are not happy with the direction of government.

If you are not happy with where our government is going, more bad policies are not going help. Things are hardly perfect in the United States but don’t let that encourage you to vote for politicians who enact policies detrimental both in the short and long term. Don’t let your rabble be raised in negative ways. Demand good decisions from your leaders with your votes. They’ll listen, I promise.

Free trade means cheaper avocados and real guacamole. How can you be against that?

Tom Liberman

Nike and the Patriotic Shoe Flap

Patriotic Shoe

There’s a ridiculous news story flapping in the wind that gives me a chance to wax poetic about patriotic behavior, moral relativism, and general Libertarian ideology. It centers on the Nike company pulling a shoe with an old American flag on it. So-called patriotic politicians and others are slamming Nike for doing so, Nike’s reasoning being that a Nazi group has used that same symbol for their own rallies.

It’s an interesting situation because for the greater part of the history of the United States it was considered quite unpatriotic and disrespectful to wear the American flag on clothing. When the hippies in the 1960’s starting doing so it was the very same “patriotic” politicians, who today criticize Nike, then lambasting the counter-culture individuals for their horrible behavior. This displays, in no uncertain terms, moral relativism.

Basically, the idea of putting the American flag on clothing has gone from being unpatriotic to patriotic over the course of about fifty years. It’s interesting that those who most vehemently claimed it was disrespectful and unpatriotic now equally disparage Nike for not marketing the shoe. This is moral relativism. What was once immoral, or unpatriotic in this case, is now quite moral and patriotic. Wearing the American flag on your clothing is a symbol of being a patriot.

Another issue this particular flap bring to the forefront is the ideology of small government. For many years it was the mantra of the Republican party that government should not be involved in business decisions, or at least that involvement should be kept to a minimum. Meanwhile, Democrats insisted that government was necessary to curb the excesses of business leaders. Obviously, it is now Republicans threatening Nike with repercussions for their business decisions and Democrats insisting Nike should be allowed to do as they want.

For a Libertarian the answer is simple. Nike can make whatever decision they want and the governor of Arizona and the leader of the U.S. Senate are clearly big government Liberals in sheep’s clothing. Don’t like it? Reality hurts. The root problem stems from all the incentives businesses take from government in the first place which then gives said officials the feeling they have the right to tell companies how they should go about running their business. It seems simple to me, get out of it altogether. No tax breaks, no incentives, sink or swim on your business decisions.

Finally, as to the groups using the thirteen-star flag symbol to promote hatred and violence. Last I checked, this is a free country although perhaps I need to check again. They can use whatever symbol they want. Nike can market whatever shoe they want. People can wear whatever clothes they want. It’s not my business and it most certainly is not the government’s business.

Tom Liberman

Clean Energy Revolution not Fueled by Government

Clean Energy v Coal

About ten or so years ago a friend of mine told me with absolute certainty that Clean Energy would never amount to more than two percent of the United States energy needs and that I was an idiot for saying otherwise. Well, in April 2019 clean energy accounted for a greater percentage of our energy than did coal. Bub, you were wrong and will continue to be more wrong with every passing year.

I’m not here to gloat about my clean energy predictions but to talk about how this revolution is happening not because of government but in spite of it. Various groups have long promoted solar, wind, and natural gas as better sources for energy because they don’t cause nearly the pollution as generated by coal. To hasten this transition of energy away from coal, such people advocated massive government encouragement, read tax breaks and subsidies, to the purveyors of clean energy. I argued that instead of subsidizing clean energy, we should simply stop doing so for coal and oil.

President Obama and the democrats largely agreed with the sentiments expressed by the clean energy crowd. They implemented plans to help spread the use of such energy and had some successes and some failures.

Enter President Trump. He essentially has the opposite plan. He wants to encourage the use of coal and dispense with helping clean energy. He has had some successes and some failures in his plans.

The reality of the situation is quite easy to see from any graph showing production associated with coal and clean energy in the last twenty years. Coal rarely dropped below 150 gigawatt-hours of energy prior to 2010. Now they never even reach this level and it is unlikely to ever rise that high again. The trend is obvious but what is driving it?

I’m happy to tell you; capitalism completely disassociated from government. Investors, builders, and entrepreneurs have no desire to invest in coal-based plants because there is more money to be made from clean energy power plants. If you’re mining coal, working at a coal-fired plant, hauling coal on the railroad, or doing anything associated with coal; start making plans to do something else. Not today, not tomorrow, but eventually; capitalism is talking and it’s not mincing words.

The most important thing to understand is this is all good and natural, as was the rise of coal in the first place. If government just stayed out of the energy business altogether, we’d likely be much further along in this process. If you enjoy breathing air and drinking water, you should be sad we are not.

Did the Obama era clean energy policies help promote them? Certainly. Have the Trump era coal energy policies helped extend the coal era? Certainly. Neither has a chance against the true forces of capitalism. Stop subsidizing energy altogether. It’s best for all of us.

Tom Liberman

NPS or Net Promoter Score and What it Means

NPS

I just became aware of a tool used by many S&P 500 companies called NPS or Net Promoter Score. The basic idea is to find out how many of your customers are so-called Promoters. The thought being if your customers give a product a 9 or 10 rating on a ten-point scale, they are promoters. Those who give it a 7 or 8 are passives and those who give it a 0 through 6 are detractors. That is what I want to examine today, the idea of promoters, passives, and detractors.

The idea was created by a fellow named Fred Reichheld although he doesn’t approve of the way it is currently being used by management in many companies. There is a lot to said for the NPS system both for and against but that’s not going to be the gist of my blog today. I want to look at NPS from a different angle.

I used to work as an instructor and we often gave out those one to ten rating scales for students to evaluate their experience in the class. I’ve also filled out many of them for various products that I’ve purchased over the years. I’ve come to a completely different conclusion than Reichheld although the practical implications may be about the same.

The idea of promoters is, of itself quite interesting. There is an underrated movie called The Joneses which examines this idea in fairly great detail. I wrote a Libertarian review of the movie not long ago should you wish to read it. In any case, the idea is that promoters go out and tell other people how great is your product and influence them into purchasing it.

The NPS system lumps people who give a product a 9 or 10 rating as promoters. My experience is fairly different. People who habitually rate a product that high are almost always True Believers who either lack critical thinking skills or simply choose not to apply them. People who rate a good product as 7 or 8 generally are more inclined to be skeptical. My own thinking is that I would almost never rate anything a perfect ten as nothing is without flaws.

The bottom end of the scale is where I radically differ from ideology of the NPS. I think people who give a product a 0 through 2 rating are generally exactly the same as those who give it a 9 or 10. They are True Haters. They don’t like either the product or its manufacturer for some personal reason and no amount quality is going to change their mind. They are, in essence, exactly the same as the people who rate the product highly. It is my opinion it is these people who should be targeted by the manufacturer for they, if swayed through some small act of kindness, will become True Believers for life.

I would be interested in a study of NPS scores compared to religious and political beliefs to see if there is a correlation between individuals who give extreme scores and those who espouse extreme political ideas.

In summation, I actually agree with some of the principles of the NPS. The system might call them Promoters while I use the term True Believers. The system calls middle scorer givers Passives whereas I call them Skeptics. The end result is; however, valid. The True Believers will promote and purchase the product no matter the quality, whereas the Skeptics will purchase products from competitors if they are objectively better. It is only with the low scorers where my disagreement with the NPS conflicts with the actions of business leaders.

What do you think?

Tom Liberman

Why is Human Composting Illegal in the First Place?

Human Composting

The State of Washington is poised to make Human Composting legal. Human Composting is a method of disposing of a corpse by simply covering it with compostable materials where it is broken down over the course of a month or two. The process is currently illegal in most states and this Libertarian asks the obvious question, why?

I’m of the opinion that the ban on any procedure other than burial or cremation speaks to the heart of the idea of limited government and reasonable regulation. I think it’s perfectly rational to have restrictions on how to properly dispose of a human corpse. Dumping a body along a main thoroughfare is clearly something against the general interests of the people. Government officials have a responsibility to carry out the will of the people and while someone might find it convenient to throw grandma’s body onto the highway, most of us will be severely inconvenienced by such an action.

The problem is the regulation that prevents any other method except those approved by the state. Instead the limitations should be much vaguer and allow people the freedom to dispose of their loved ones in a variety of ways. The regulation could simply read that corpses should be disposed of in designated regions in a manner that doesn’t inconvenience others. That way people would be free to conduct the process as they saw fit with the minor limitations as stated. Judges could make common sense rulings in regards to those who failed to obey the law.

A regulation so worded would allow Human Composting without any sort of government intervention. We wouldn’t need someone to sponsor a bill, to lobby politicians, or to fight against the existing purveyors of cremation and burial who have a vested interest in preventing the legalization of Human Composting as an economic threat.

This is what Libertarians mean when we speak of limited government. We don’t advocate anarchy and the dumping of human corpses wherever might be convenient. The problem is that regulations are so specific they make doing business impossible unless you bribe politicians into passing rules that benefit your company. This is Crony Capitalism and it is rampant in our nation from Federal to State to Local government.

Ask yourself, why is Human Composting illegal? It’s a perfectly reasonable method of disposing of a corpse and, frankly, the choice I think many people would make if given the option. I know I do.

Tom Liberman

EB-5 Program and Buying United States Citizenship

EB-5 Hudson Yards

Until I read a fascinating story, I had not heard of something called the EB-5 Visa Program for foreign investors. The idea is simple enough. If a foreign investor pumps $500,000 to a $1,000,000 into a project targeting a rural or poor urban area, their children are given legal rights to live in the United States. What could go wrong? Exactly what you would expect.

Basically, the meaning of jobs being created and poor regions as defined by the EB-5 was stretched so that most of the money went to fund luxury projects in wealthy cities. Districts were drawn to include poor regions but the vast majority of the construction took place in wealthy areas. That along with the fact that some of the developers simply absconded with large sums of money.

Most of the investors appear to come from China and individuals of enormous wealth found a way to invest their money not only with a financial return but also a pathway to United States citizenship for their children.

Personally, I’m not convinced the EB-5 program was created with the best of intentions at all. The politicians back in 1990, when it was implemented, most likely well-understand where the money would go and created a system by which it could flow to wealthy regions while following the loose guidelines of the program.

I’m not even upset the money went to fund luxury projects like Hudson Yards. I’m also not opposed to foreign nationals purchasing U.S. citizenship, which is exactly what is going on despite any arguments to the contrary. What makes me angry is pretending to be doing a good and wonderful thing by helping out the poor in rural regions and urban cities when there was never any such intention.

Some of the money did, in fact, go to projects of the nature for which they were intended but I strongly suspect that would have been the case even if the base purpose of the program was to simply attract foreign investments. When money comes into the United States for various projects it is a good thing. It would be nice if more money was spent to help poor rural areas and poverty ridden urban regions but reality is a tough mistress.

People largely don’t want luxury apartments in rural regions or the poor areas of the inner city. However, when a region undergoes development the area around it often improves as well. This reality is the best we can hope to accomplish.

Creating a program like EB-5 with unrealistic expectations of development in rural and poor regions is an exercise in deceit. I’m here to help, said the politician while stuffing their stomach at the trough. My Libertarian sensibilities say, go ahead and stuff your face, but be honest about it.

If the EB-5 program was created honestly, I’m certain organizations like Asian Americans for Equality would have found a way to use that money to help the poor in both rural and urban regions. I’m sure many investors believed they were doing a good thing because the project was under the mantle of the EB-5.

Tell investors the truth. This project is in a wealthy region and this other one is in a disadvantaged region. You decide which one in which to invest. I’d guess you’d have had more money going to the sorts of projects the entire program was designed to fund in the first place.

Tom Liberman

Why Does the Justice Department Care about the Academy Awards?

Academy Awards

The United States Justice Department just warned the Motion Picture Academy that a proposed rule change about eligibility to receive Academy Awards might result in Anti-Trust legal ramifications. Really? This is what the Justice Department of the United States of America is spending their time doing? Threatening award ceremonies about how they decide eligibility? I’ll give you a small hint, the executives of Amazon and Netflix are opposed to the changes and they just might have a dollar or two spend.

First, let’s examine what is being proposed. With the advent and enormous growth of streaming services there are more and more movies spending little or no time in the theaters. They are developed and sold directly for television. Recently the Netflix film Roma received a nomination for Best Picture and this triggered a response from the Academy and particularly influential filmmaker Steven Spielberg. They believe such films should be eligible for Emmy Awards but not Academy Awards. The idea being that the Academy Awards are for movies while the Emmy Awards are for television.

I think there are argument to be made both ways. The made for streaming movies are not in the theaters for any appreciable amount of time, mostly just so they can be eligible for movie awards. However, they are in the traditional movie format and home theaters are more and more becoming a venue for audiences to view first run movies.

We can argue back and forth about whether or not such productions are movies or television shows but it’s beyond my comprehension that the Justice Departments thinks they have a say in this matter. A major award certainly increases publicity and thus revenue for a particular show or movie but it is up to the agency that runs the ceremony to decide upon the rules for inclusion. Just because they choose to exclude a group isn’t an anti-trust violation. They are not engaged in collusion, price-fixing, bid-rigging, or even group boycotting which is, I suspect, the justification for the warning.

Group boycotting is when several companies refuse to do business with a third party unless they stop doing business with a competitor. An example would be a clothing store that refused to purchase a particular line because it was being sold to a competitor of that business.

Despite any Justice Department claims to the contrary, what it is doing is damning in the eyes of this Libertarian. The government is attempting to flex its muscles at the behest of bribes, that is to say campaign contributions and lobbyist gifts, to force an independent company to do business in a way that is favorable to a third party, in this case Amazon and Netflix.

This is a stark example of Crony Capitalism. The government decides how a company does business. It’s destroying the capitalistic spirt of our nation and I’ve written about it elsewhere.

Out, out, foul government. Back to your closet where you belong.

Tom Liberman

Why the Government should not Ground 737 MAX Planes

737 MAX
Boeing 737-MAX8-200 K66201

The Federal Aviation Administration, at the behest of President Trump, has grounded Boeing 737 MAX airplanes because of two accidents over the last five months involving such planes. There is not yet evidence to suggest the crashes are related to one another or a problem with the plane but the public perception is that there is such a correlation. My question today is if the government should mandate airlines stop flying the planes?

Most of Europe, China, Canada, Panama and some other countries had already mandated various airlines stop flying the planes while other nations largely left the decision up to the companies. The first question you might ask yourself is how the United States federal government has the power to dictate to a private company which planes to fly. I discussed much of their reasoning in a blog back in May of 2017. I won’t go into details but if you want to learn more please peruse that article.

Certainly, people are afraid. Southwest Airline is the largest user of the 737 MAX planes with 34 of them and they are offering customers a chance to change flights to a different plane free of charge. This is an example of capitalism, without government interference, in action. If enough people refuse to fly on the 737 MAX planes it is fairly obvious that Southwest and other airlines would stop using them until some sort of safety check was in place.

It is clear the 737 MAX planes have flown many times without incident since they began service in May of 2017. However, two accidents within half a year does bring into question the plane’s general safety. This brings us to the topic at hand. It is better for the government to mandate the stoppage or to let each airline make the decision independently of oversight?

No one was calling for the plane to be grounded before the second accident so neither of those tragedies would have been prevented by a grounding. After the second accident the airlines were largely offering people a chance to fly on different planes so the net result of the grounding is relatively small and I suspect if enough people changed flights the airlines would have grounded the planes on their own. The practical difference is fairly small although I’m sure that would come as no comfort to the families of victims if there is a third crash.

I absolutely prefer letting each airline make their own decision about the 737 MAX. The reason is there is potential for government malfeasance. I don’t think it’s unreasonable to suggest that politicians, all the way up to and including the president, might have a grudge against one company or another and use this power to influence profits. This is Crony Capitalism at its worst.

I recognize this is a special circumstance to some degree but I’m largely against the government interfering in business decisions and that goes for this situation as well. I don’t think this grounding makes anyone safer and it further cements the idea that government has and should use this sort of power. That is a danger in itself.

Tom Liberman

Philadelphia Bans Cashless Stores and Why It is Silly

Cashless Stores

The idea of Cashless stores has been around for a while now but with Amazon set to open a series of Amazon Go outlets around the country it’s getting more news. The city of Philadelphia has now passed a law making in mandatory for most retail stores to accept cash. Cashless stores are also banned in the state of Massachusetts with similar bans being considered in New York and New Jersey. Why is all this happening and will the legislative efforts solve the issues or make them worse?

The reason retail outlets want to go cashless is because they can streamline their operations. They don’t need cashiers to make change, count cash, or risk being robbed while delivering bags of money to the bank. A quick swipe and you’re out of the store.

The reason politicians want to ban it is because such cashless stores inordinately affect the poor. People from lower income classes don’t always have credit cards or debit cards or smart phones. This means that if every grocery store in a particular region had become a cashless store, those people would not be able to purchase groceries.

It’s important to understand that both of these arguments are absolutely true. If retail outlets streamline their processes that translates to savings for consumers. If poor people are unable to purchase basic necessities that means suffering for them. We like lower prices but we don’t like suffering. The deciding factor then becomes if the proposed legislation is going to alleviate the problem it purports to solve.

Retail outlets want your money. They want rich people’s money and they want poor people’s money. There are a good number of poor people in this country and if grocery outlets shut them out then the company itself will certainly suffer. This is something the business fully understands, better than any politician I’d guess. They know the numbers. Because of this knowledge, retailers like Amazon now offer lower cost membership to low-income families enabling them to make purchase. I’d guess any grocery store in a low-income area would immediately make provisions to the do the same, they don’t want to lose out on all that business.

If a business is able to offer lower prices through modern business models, and we need look no further than Amazon and Walmart to see this, then people save money, everyone who purchases anything saves money. This includes poor people who will, if they want to purchase something at a cashless store, have to pay some amount for a debit card or a membership.

It’s my opinion in the end the poor person is going to save money by entering into the new business model, but I don’t see it as worse than a break-even proposition. That being the case, the legislation is putting an undue burden on the business, it is politicians sticking their noses in and creating laws that don’t help anyone.

The point of a law is help enforce a just system. When it the law does not do so, it shouldn’t be there at all.

Tom Liberman

Local Grocers Helping People and Wilbur Ross

Wilbur Ross

Commerce Secretary Wilbur Ross recently said something I think illustrates one of the biggest problems in implementing good economic policy. In addressing the need for federal workers to make it through the shutdown, he said, “Local people know who they are, when they go for groceries and everything else.” I see this sort of thinking from many people in the business community and it demonstrates an old military adage that tells us we are always fighting the last war.

I cannot tell you how many times I’ve heard politicians and local leaders talk about how important small business is to the economy of the United States, how it is the backbone of our nation. This was true for a long period of time after the Industrial Revolution but today our economy is largely driven by what is called Enterprise Businesses or Multinationals. The majority of business receipts are controlled by such companies despite their entire number being a small percentage of all businesses in the nation.

Secretary Ross and President Trump are under the impression that we all reside in a small-town America that no longer exists. Most people do their shopping at Wholefoods, at Walmart, at Home Depot, or online, even those who live in rural regions. While the clerks at such companies might well know you by name, they don’t function the same way mom and pop grocery stores did even just thirty years ago. Their accounts are done electronically and they can’t just give people another month or two to make payments. To do so requires getting into the computer code at corporate headquarters. It’s just not feasible and the fact that men like Secretary Ross and President Trump, supposedly powerful business leaders, don’t seem to understand such a simple reality is discouraging.

This way of doing business saves we consumers a huge percentage of our paychecks and allows us to have many nice things. The global economy and the Enterprise Companies that arose with it deliver goods to our doors at shockingly low prices. Our choices are all but limitless and this is a product of capitalism. It is a good thing. But it also means Wholefoods can’t just give Tom a break on my purchase of potatoes because they know I’m good for it.

This is the nature of our economic world. This is reality. Perhaps you harken back to a simpler time when we had to spend a far greater percentage of our paycheck on food, shelter, and clothing. I don’t. Capitalism and globalization have brought us so many wonderful things including the incredibly cheap computer, tablet, or phone on which you are reading this blog.

Until our leaders recognize this modern world, they will not be able to fix its remaining economic issues. Things are not perfect, that is certain, and I do not say they are so. What I am saying is that if you are the Secretary of Commerce, if you are the President of the United States, maybe you should stop living in a delusional version of a world that no longer exists. You might make better decisions for us all.

Tom Liberman

Why Does the Federal Reserve Raise Interest Rates?

Federal Reserve

The Federal Reserve and the President of the United States seem to be at odds over the idea of raising interest rates. I’m of the opinion that most people, including many of my fellow Libertarians, don’t really understand the base purpose of the Federal Reserve and the point of increasing interest rates. I’m not an economist by trade but the issue is relatively straight-forward and I thought I’d take a few moments to go over it.

As I said, it’s relatively simple. Pretty much since the beginning of human history there has been something called the business cycle, or in common parlance, the boom-bust cycle. Basically, when times are good and people have plenty of money, they tend to spend it on speculative interests in the hope of gaining much more money. In contrast, when times are not good and money is in short supply, people have a tendency to hoard what they have. These two things exacerbate the business cycle.

Essentially, because people are spending more money on potentially enriching schemes during boom times the bubble goes to extremely high levels before it bursts and creates devastating economic destruction. Once the bust takes hold it is difficult to stop the downward spiral because people are reluctant to borrow money.

The solution created by Alexander Hamilton and the founders was the First Bank of the United States. Its primary idea was to raise interest rates during boom times thus curtailing people’s willingness to borrow money and fuel the boom and to lower interest rates during times of bust to encourage people to take out loans and pull the economy from its collapse.

It did not stop the business cycle altogether and thus its opponents, who felt there was artificial manipulation of the economy at the expense of growth abolished it. The booms and bust then grew much worse and so the Second Bank of the United States was formed with essentially the same goals as the first. Once again, the business cycle continued although with tempered effects because of the policies of the bank. As can be expected, people grew unhappy with the bank because they felt it was impacting the booming economy negatively and so it was abolished.

Immediately thereafter there again began a more virulent series of business cycles until Congress established the Federal Reserve which still exists to this day. As expected, the business cycles continue to be a problem as we have seen recently. One of the things that has happened since President Reagan is that the Federal Reserve has acted more to promote economic growth but not to slow it. This means, naturally that the boom cycle is not properly tempered.

That is the point of the Federal Reserve in their recent raising of interest rates. They desire to slow economic growth to temper the boom section of the business cycle. These actions anger the President of the United States in the midst of that cycle. Politicians desire to brag about the good they have done and lay blame for the bad, but the business cycle is beyond their control. The Federal Reserve cannot stop the cycle, the people who make policy can only hope to temper the catastrophic effects of the inevitable bust.

That is why it is generally considered a bad idea for politicians to dictate policy to the Federal Reserve. Their actions are often, and for good reason, opposite of those wished by the politicians.

Tom Liberman

Does Ticketmaster Mind Scalpers Breaking Rules?

TicketmasterThere’s a fascinating story in the news involving Ticketmaster being complicit in scalpers reselling tickets. The idea is simple enough, Ticketmaster has a service called TradeDesk in which people who have tickets sell them to willing buyers. The problem is TradeDesk is largely a way for scalpers who purchase tickets on Ticketmaster to resell them at higher prices.

Why is this problem? At first glance it doesn’t seem as if Ticketmaster is doing anything wrong. They sell the tickets to whoever is first to purchase them and then are involved in the resale at a higher, or lower, price. This is obviously lucrative for Ticketmaster as they get a percentage of all sales; essentially, they are profiting twice off the same product. However, thanks to some undercover work from the Canadian Broadcasting Corporation, it seems Ticketmaster is making it very easy for scalpers to purchase large numbers of tickets to events before the public has a chance to do the same. Ticketmaster has a rule in which no one is allowed to buy more than a small block of tickets but they essentially ignore it when scalpers bypass it.

Thus, people who want to purchase tickets to an event never really have much of a chance and are forced, if they still want to attend, to buy the higher priced tickets at TradeDesk. Sales representatives for Ticketmaster told undercover investigators they pretty much were facilitating such transactions. The company is denying the allegation and said they are looking into the practice. They claim they attempt to stop such large purchases to the best of their abilities.

This entire thing intrigues me from a Libertarian perspective. Let’s imagine Ticketmaster doesn’t have the rule about blocks of tickets. Then what we are seeing is capitalism in action. The event promoters generally set the ticket prices and if resellers are able to get a higher price, it’s likely the promoters set the original price too low. That’s their bad. The scalpers are merely capitalizing on a mistake. The risk is all with the reseller. If they misjudge and have to resell the tickets at a lower price, because there is little interest for instance, they lose money.

I totally agree Ticketmaster is not being transparent if they are, indeed, allowing scalpers to purchase large blocks of tickets with the intent of reselling in violation of Ticketmaster rules. The reality of the supposed crime is more complex. Even if Ticketmaster cracks down on large blocks of tickets being sold to a single user, I’m fairly certain the scalpers will refine the technology they use to call and order and still scarf up the majority of the tickets.

Is it fair to the average user who just wants to go to the concert or see the game at the price of the original ticket? No. That’s clear. Then again, such a viewer can simply choose not to spend the extra money for the resold ticket.

What do you think?

Tom Liberman

Rich Give Almost Fifteen Billion in Charity Despite Crony Capitalism

Charity GivingThe nation’s top fifty donors scraped up $14.7 billion to give to a charity this past year. What sort of things are the rich trying to do with their money? How can we encourage them to give more?

The Bill and Melinda Gates Foundation alone donated $4.8 billion to charity organizations with a large hunk of it going to education. Educational organizations dominated the donations this year. The reason largely given is that it’s vital to have an educated workforce in the coming generations. Menial jobs are going away and highly skilled positions are going unfilled.

It won’t surprise you to learn that the biggest donors these days represent Technology Industries. They have supplanted finance donors in recent years and they, more than anyone, know their source of income is being generated by skilled workers. Without such workers, their income evaporates. It is in their interest to have educated workers but it is also in the interest of the people getting an education. A symbiotic relationship that highlights the ideas of Enlightened Self-Interest and Rational Egoism. In other words, charity isn’t just helping someone else.

At its heart is the idea: What is good for me is generally good for those around me. Anyone who runs a business isn’t going to do well without good employees and customers with ready cash. At least it used to be that way. We’ve perverted things in the United States with Crony Capitalism.

Business leaders today also spend a great deal of their money attempting to bribe, that is to say finance, politicians in their campaigns in order to influence policy. The reason business leaders do this is that political leaders determine the success and failure of business through legislation. Politicians hold the reins and with the stroke of a pen can promote one business and destroy a competitor. This forces businesses to spend money buying influence instead of running their company.

The cause and effect relationship here is infinitely interesting to me. The ostensible reason politicians were given this ability to regulate business is the impression that corporate leaders are going about their jobs in a manner detrimental to the consumer. Politicians must save us from such evil! This, in turn, led to businesses becoming overly involved in politics. It was a matter of survival.

Despite having to give enormous sums of money to politicians, these fifty people still managed to donate nearly fifteen billion to charity. I wonder how high that number might be if they didn’t have to worry about bribing, I mean donating, to politicians. If politicians can’t decide the fate of a business, then business leaders don’t care who is elected. They can go about improving their company. This means giving customers what they want and training better employees.

What started with good intentions, regulating egregious and criminal business practices, has become egregious and criminal of itself. If my competitor gives more money, that business will win through the efforts of legislators who don’t care about good products or educated workers. They create winners and losers with regulations.

We didn’t solve the problem, we made it far worse and have taken away who knows how much money from charity in the meantime.

If the solution is making the problem worse, it’s not a solution at all. Something to think about.

Tom Liberman