Sunday, December 2, 2012

The Game is Increasingly Rigged


The "game" as you call it, or the allocation of resources is not rigged yet, but unfortunately increasingly it is so. President Obama famously says he wants an economy where "everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules." I think it's the height of hypocrisy particularly the part about everyone playing by the same rules.

A $90 billion Department of Energy direct subsidy and loan guarantee program for solar, wind and battery producers is explicitly favoring one over another, explicitly different rules for different players.

The bail-out of GM and Chrysler is explicitly favoring those two companies over Ford and the domestic production of Honda, Toyota, Nissan etc. It explicitly suspends the rules for a favored player.

Cash for clunkers, which is certainly one of the most useless programs of the past few years, and there is a lot of competition for most useless, suspends the rules for car buyers during a short window of time. Subsidizing the purchase of electric vehicles shows favoritism to some players.

Visa, Mastercard, American Express and the banks spend billions to offer consumers the convenience of using credit and debit cards for everyday purchases. Retailers embrace the technology to lower their costs, increase throughput and attract consumers. One day, Senator Dick Durbin (D-IL) decides the fees retailers pay to banks is too high and unilaterally lowers those fees resulting in fewer free checking accounts for low-balance depositors, which had been subsidized by the card fees. Fair shot. Fair share. Same rules.

Dodd-Frank institutionalizes too big to fail, increases the costs to operate smaller banks, resulting in a shift in market share to the larger banks.

Tax filers with AGI greater than $200,000 generate 27% of total personal adjusted gross income and pay 51.75% of total income taxes. Filers with AGI between $50,000 and $200,000 generate 50% of total adjusted gross income and pay 41.55% of total income tax. Which means these 48.9 million filers pay 91% of the total income tax. 3% of the filers with AGI greater than $200,000 pay 52% of the total income tax collected and including filers with AGI over $50,000 34% of the filers pay over 90% of the total income tax. Fair share. Same rules. Fair shot.

Teenagers with little work experience or skills to offer employers are priced out of the labor market dooming them to chronically high unemployment. Fair shot.

Mortgage relief programs are a hodge-podge of rules and incentives leading to higher unemployment and a calcified market. Fair shot. Same rules.

All of these programs plus ethanol subsidies, the Ex-Im bank and the multitude of other programs and subsidies that favor the connected, who use that connection to become rich result in the rigged game.

What has Obama done to change the rigged game? Rigged it more. It's the Democratic Party go-to response: if something isn't working-Do More of It. You are right, Americans may be more willing to accept the reality of higher taxes or fewer services if they believe the game isn't rigged. But unless Obama has a Saul on the road to Damascus moment, it's not happening with this administration.


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