Now Comes the Hard Part of the Dockworkers Fight: Automation

Operators can afford the 62% pay increase, but not the low productivity that the work rules produce

By Peter Tirschwell. He is vice president of global intelligence and analytics at S&P Global Market Intelligence and chairman of the TPM shipping conference. Excerpts:

"the tentative deal that averted the strike will result in dockworkers at the New York-New Jersey port earning more than $500,000 a year on average"

"the U.S. is building new port facilities at a snail’s pace—the last new marine container terminal, at Charleston, S.C., opened in 2021 and was the first since 2009—the only way to expand capacity is by handling more cargo more quickly through existing facilities. The only way to do that is with automated cargo handling."

"The lack of automation in the U.S.—only three port facilities are fully automated, all on the West Coast—exposes ports as an Achilles’ heel of U.S. trade competitiveness. High costs and inefficiency have long been the status quo. 

"Not one U.S. port ranks in the top 50 globally in productivity as defined by the number of containers moved on and off ships per hour"

"The fully automated Long Beach Container Terminal, completed in 2021, can handle 12,000 to 15,000 20-foot equivalent units per acre per year versus 6,000 to 8,000 at a nonautomated terminal"

"Low productivity was one of the factors behind a record 109 containerships being idled off the Los Angeles-Long Beach port complex in early 2022, stranding billions of dollars worth of goods and upending supply chains."

"The consequence of low port productivity is that “instead of facilitating trade, the port increases the cost of imports and exports, reduces competitiveness, and inhibits economic growth,” the World Bank said in its 2023 index. Another way to look at it is the outsize economic impact created by ports: The Savannah, Ga., port employs roughly 2,000 dockworkers but more than half a million jobs, or 11% of Georgia employment, is dependent in some way on it—including those who drive trucks and work in warehouses, factories and retail stores."

Cost of Producing Green Hydrogen Makes It Prohibitive, Says Study

Capturing carbon dioxide from the atmosphere is more cost effective than producing hydrogen for fuel, say Harvard researchers

By Yusuf Khan of The WSJ. Excerpts:

"A Harvard University study casts doubt on the viability of hydrogen as a fuel in the U.S.

The researchers say the costs of producing, moving and storing the gas are higher than they are for using fossil fuels and then removing carbon from the atmosphere afterwards. 

"for every metric ton of carbon dioxide it now reduces, green hydrogen costs between $500 and $1,250. But carbon capture and storage prices currently range between $100 and $1,000 a ton"

"“unclear demand signals, financing hurdles, delays to incentives, regulatory uncertainties, licensing and permitting issues and operational challenges” were the main barriers to growth currently."

Elon Musk Rides to Biden’s Hurricane Rescue

The FCC withdrew a grant for Starlink to cover rural counties, but the satellite service is now saving the day in those counties

WSJ editorial. 

"As Hurricane Milton wreaks destruction through central Florida, the recovery from Hurricane Helene is a long way from over in the rural Southeast. But one good news story is how Elon Musk’s Starlink satellite service has rescued cell phone and internet service in rural counties that desperately needed it.

Private groups and the Federal Emergency Management Agency (FEMA) in recent days have deployed more than a thousand Starlink terminals to restore internet service in hard-hit areas of Appalachia. The Federal Communications Commission has also given Starlink the green-light to test a direct-to-cell service to broadcast emergency alerts.

Mr. Musk says Starlink will provide temporary free satellite service in affected areas. He’s doing so even though the FCC last December yanked an $885 million grant for Starlink to furnish high-speed internet to 640,000 rural homes and businesses—including in the very counties where FEMA is now deploying Starlink’s satellites.

As we wrote at the time, the FCC awarded Starlink the grant in 2020 because it can cover remote regions at lower cost than traditional broadband providers. But the FCC’s Democratic majority revoked Starlink’s funding last year, claiming it wasn’t making fast enough progress to connect rural Americans—never mind that other FCC funding recipients weren’t doing any better.

The Biden FCC majority called Starlink unproven and unreliable, though Ukraine’s military and people were relying on its service after Russia destroyed other networks. As GOP commissioner Brendan Carr noted in dissent, the FCC’s decision “cannot be explained by any objective application of law, facts, or policy,” adding that the decision “fits the Biden Administration’s pattern of regulatory harassment” of Mr. Musk’s businesses.

The de-funding by Democrats is now looking even more political. Two weeks ago FCC Chair Jessica Rosenworcel granted Dish Network chairman Charlie Ergen a three-year extension to meet FCC deadlines to build out his fledgling 5G network and avoid stiff penalties for squatting on valuable spectrum. Starlink was well on its way to meeting its commitments to the FCC, but Mr. Ergen wasn’t close to meeting his.

Ah, but Mr. Ergen is a Biden-Harris campaign donor while Mr. Musk is a critic. Note also that Dish lobbied the FCC in 2022 to scrap the Starlink award, saying it “cannot credibly claim that it will be able to fulfill its obligations.” Perhaps Mr. Ergen hopes to win federal funding to cover the rural areas that the FCC had tapped Starlink to connect.

It would be better if the government weren’t subsidizing the expansion of any private broadband networks. But if they’re going to pick winners and losers, the feds should do so based on objective criteria and ensure taxpayer money is spent efficiently.

Instead, the Administration has prioritized $42.5 billion in broadband funding from the infrastructure bill for the most expensive fiber projects while effectively excluding Starlink even though it can connect rural Americans at a fraction of the cost. It’s no small irony that FEMA is deploying Starlink systems in some of the same rural areas that Biden officials earlier wouldn’t let Starlink serve.

Starlink’s FCC award would have covered all or parts of 17 of the 21 North Carolina counties hardest hit by the hurricane. The least President Biden could do is thank Mr. Musk for saving the day."

A former DEA agent is convicted of protecting drug traffickers

By CAROLYN THOMPSON of AP. Excerpts:

"A former U.S. Drug Enforcement Administration agent in Buffalo, New York, was convicted of corruption Thursday following a second trial on charges he used his position to protect drug traffickers he believed were associated with organized crime.

Jurors found Joseph Bongiovanni, 60, guilty on seven of the 11 counts he faced.

Prosecutors said Bongiovanni, for at least a decade, shielded childhood friends who became drug dealers and other suspects with ties to organized crime, tipping them off to investigations and falsifying DEA reports. He was accused of taking at least $250,000 in bribes that prosecutors said he used for necessities, as well as trips and other luxuries.

“This jury determined he was a corrupt federal agent,” Assistant U.S. Attorney Joseph Tripi said at a news conference after the verdict, “and he violated his oath and duties to protect those that he should have been investigating and arresting.” 

The case cast a harsh light on the DEA’s supervision of agents amid a string of corruption scandals at the agency. Bongiovanni is among at least 16 DEA agents brought up on federal charges since 2015. Many of the cases resulted in prison terms, including two former DEA supervisors sentenced in a Miami bribery scandal involving intelligence leaks to defense attorneys."  

Bongiovanni was convicted of four counts of obstruction of justice, as well as single counts of conspiracy to defraud the United States, conspiracy to distribute controlled substances and making false statements to law enforcement."

"The case is part of a sex-trafficking prosecution involving the Pharoah’s Gentlemen’s Club outside Buffalo. Bongiovanni was childhood friends with the strip club’s owner, Peter Gerace Jr., who authorities say has close ties to both the Buffalo Mafia and the violent Outlaws Motorcycle Club. Gerace is awaiting trial on numerous charges, including that he bribed Bongiovanni. He has pleaded not guilty."

Kamala Harris Is Eyeing Your 401(k)

Hiking the corporate tax would leave less of your investments

By Jeff Yass and Stephen Moore. 

"Kamala Harris keeps changing her tax plan, but her latest proposal is to raise the corporate tax rate to 28%. She would also raise the top capital-gains tax to roughly 32%, the highest since the 1970s.

Extracting money from those big and faceless corporations with profits in the tens of billions of dollars has populist appeal. But the more accurate way to think of the corporate income tax is that it puts Uncle Sam first in line to take a share of all the profits an American corporation earns. Only after the government takes its pound of flesh does anyone else get a return on his money.

At a 28% federal corporate tax and an average of roughly a 5% state and local tax, the government would snatch away roughly 33 cents of every dollar of profit. This leaves 67 cents to the shareholders. Those include the more than 100 million Americans who own stock directly or through pension and other retirement funds. Every percentage point that Congress and Ms. Harris raise the tax would dilute the value of the stock owned by the rest of us. 

Things get even bleaker when one factors in her plan to raise the capital-gains rate. She favors raising the rate to roughly 32% from 23.8%. Add state capital-gains taxes and the rate can easily reach 36%. This is the government taking a second bite out of the corporate apple before the rest of the country has even taken its first. Remember: The value of a share of stock is the present value discounted by the expected after-tax future earnings of the company.

Add it all up and government would snatch at least 50% of nearly every corporation in America under the Harris tax scheme. That sounds an awful lot like socialism. Everyone with stock—not only the Warren Buffetts of the world—and the more than 70 million Americans with 401(k) plans and millions more with other retirement stock holdings would be made poorer.

Companies could find loopholes and deductions to bring the effective corporate rate lower than the statutory rate. But many of those require companies to follow government orders by spending money on green energy and the like. And many of these are effectively back-door taxes: They divert dollars away from companies’ core mission—providing profitable products—and toward unrelated causes.

It is a mathematical certainty that Ms. Harris’s tax scheme will lower the value of stocks a great deal. What we find troubling is that most investors who own as much as half of a company don’t vilify it as a “price gouger” or hassle them with inane and costly regulations. Ms. Harris would treat corporate America as a fat goose to be plucked, and the rest of us would pay the price."

More Truth About Income Inequality

A new study says the more you work, the more skills you gain, and the more you earn

WSJ editorial.

"A certain kind of politician loves to rail about income inequality and the corporate greed and injustice that supposedly cause it. It won’t surprise anyone who’s ever held a job in the private economy that the truth is more complex, and a new study adds to our understanding of how labor markets really work.

The headline conclusion from the working paper published last month by the National Bureau of Economic Research is that the more you work over your lifetime, the more you earn. So far so obvious, but the surprises lurk in an explanation that’s more complex than you’d think.

The authors (from the Federal Reserve Bank of St. Louis, Vanderbilt University and Princeton) use a rich vein of survey data tracking individuals as far back as 1979. They find that a major determinant of total lifetime hours worked is individual choice—some people just prefer to work more, while others might prioritize other activities.

Going a step further, the paper finds that those who work more earn more because they accumulate more skills during the extra time they work. The overlapping effects of different preferences for work and different levels of skills acquisition account for a hefty share of overall differences in lifetime earnings, and operate independent of other factors such as the level of education or skills an individual gains before entering the labor force. In other words, income inequality is in part a matter of choice rather than intractable economic or social forces. Sorry, socialists.

The study isn’t a comprehensive overview of labor-market behavior, and the authors don’t claim it is. Their survey sample examines only men who have been “highly attached” to the labor market over their full working lives, meaning working at least 520 hours per year.

The conclusions might be relevant to debates about gender pay gaps—where different preferences for paid work versus working at home to raise a family often come into play—but that awaits further study.

One implication is that a labor market is too complex to bear simple analyses—or blunt-force regulation. The economists note as a stark example the failure of French efforts to boost earnings by limiting the work week. Politicians always hope this will force companies to hire more workers, and Sen. Bernie Sanders wants a 32-hour work week. But such laws prevent those who want to work more from doing so, and boosting their skills in the process, while not requiring those who prefer to work less to spend more time on the job.

This is a good argument for more humility from politicians—not that this will be forthcoming. But it’s always good to know the truth, even if politicians ignore it."

Ordinary People Lose with European-Sized Government

By Dan Mitchell.

"There are three important things to understand about Western Europe.

• The burden of government is larger than it is in the United States.
• Lower-income and middle-class taxpayers finance that extra spending.
• Europe’s greater fiscal burden is associated with less prosperity.

Today, let’s further look at what we can learn from Europe.

Adam Michel of the Cato Institute authored a new study that compares Europe and the United States.

As part of his report, he calculated that the a middle-class European pays nearly $12,000 more in taxes than an American at the same income level.

The huge gap is due mostly to Europe’s value-added taxes and employer payroll taxes (which companies pay on behalf of workers).

Needless to say, this is not good news for European households.

But that’s just part of the bad news. You also have to consider that Europeans are much less likely to earn as much money as their American counterparts.

There’s an enormous gap between the U.S. and E.U. when looking at per-capita GDP. But GDP doesn’t directly translate into living standards, so let’s look at another chart from Adam’s paper.

Here’s a comparison of per-capita consumption (using the same AIC data I’ve shared in 2012, 2014, 2017, 2019, and 2022). Only the tiny tax haven of Luxembourg is close to the United States.

By the way, I don’t blame Eastern European nations for being way behind the United States. They still have to catch up after suffering from communist enslavement (though some of them are doing a much better job than others).

But I’m digressing. The main lesson to be learned from today’s column is that America should not become more like Europe. That’s a recipe for earning less income and paying higher taxes. I hope Trump and Harris are paying attention."