Yellen’s Sleight of Hand to Vindicate Bidenomics

‘Wages have risen more than prices since 2019,’ she writes, but Biden took over in 2021

Letter to The WSJ.

"Treasury Secretary Janet Yellen writes that “wages have risen more than prices since 2019” to justify her claim that “our economic position reflects actions the Biden administration has taken over the past three years” (“Bidenomics Is Working for the Middle Class,” op-ed, Dec. 21).

The problem with this claim is that President Biden wasn’t in office a single day in 2019—or in 2020. From the beginning of 2019 to the end of 2020, with Donald Trump still in the White House, real weekly earnings rose by $69 (or 6.2%) and annual median income rose by $3,592. But from the beginning of the Biden administration to the third quarter of 2023, the last quarter for which we have data, real weekly earnings fell by more than $25 (or 2.1%), pushing real annual median income down by $1,306.

Maybe Bidenomics works only when Mr. Biden isn’t President."

Phil Gramm and Prof. Donald Boudreaux

American Enterprise Institute and George Mason U., Mercatus Center

Helotes, Texas, and Fairfax, Va.

Mr. Gramm was chairman of the Senate Banking Committee."

Why Can’t Italy’s Economy Get Into Gear? Consider the Taxi Line

Painfully long waits for taxis offer a clue about the country’s 30 years of stagnation

By Eric Sylvers of The WSJ. Excerpts:

"Finding a taxi in Italy’s financial capital when it is raining involves long lines and patience. During trade fairs and fashion shows it is even harder: Demand surges but the number of taxis stays the same.

Even on sunny days, there are lines of suitcase-laden travelers searching forlornly for a taxi at airports and train stations around Italy. Many locals don’t even bother trying."

"A major reason for Italy’s stagnation is the power of vested-interest groups who successfully impede efforts to boost competition, innovation and productivity."

"Italy’s economy is 1.5% smaller than it was in 2007, before the global financial crisis, according to the World Bank. In that time Germany’s economy has grown 17%, France’s by 13% and the U.S.’s by 28%"

"Much of Italy’s stasis can be traced to a lack of meritocracy that permeates the public and private sectors, said Lorenzo Codogno, an economist and consultant"

"An ingrained system that prizes seniority over the skills of individuals is also contributing to Italy’s lack of economic progress. The result is that almost 21% of Italians aged 15 to 34 aren’t employed, studying or in training, the highest in the EU. That compares with 13% in France and 10% in Germany.

For decades, Italy has also struggled to improve a painfully slow civil-justice system that puts off investors, a large underground economy, high national debts, chronic tax evasion and large differences in wealth between the country’s north and south.

Compared with other Western countries, Italy has few internationally successful startups and attracts little venture capital. Italy barely features in the leading rankings of the world’s top 100 universities, and Italian high-school students underperform most other developed countries.

Italian beaches offer another glimpse of the lack of competition and resistance to change. Year after year, the same businesses pay public authorities a small fee for lucrative concessions to rent umbrellas and reclining chairs to beachgoers. The EU has complained about the lack of competitive public tenders and the insignificant revenue the Italian government collects for those privileges.

"The problems at Italy’s beaches and taxi stands show that the country’s woes are related to bad laws, rather than any inherent lack of talent or entrepreneurship in the country, said Carlo Maria Capè, the chief executive of BIP, which advises businesses in Europe and South America on using technology."

Taxi drivers have successfully pushed for laws that keep ride-hailing apps such as Uber heavily restricted. Uber drivers in Italy must be licensed and have a luxury car, which makes the service more expensive than a regular taxi and dulls its appeal for most would-be users. In many Italian cities taxi drivers have blocked the issuing of new taxi licenses for the past two decades, protecting the value of their own license but making it hard to find a ride. But they are losing the nation’s sympathy. 

Taxi drivers’ associations argue they don’t make enough money to survive if their market were opened up. But a taxi driver from Bologna became a cult hero on social media when he challenged that narrative by posting his daily takings on X, formerly Twitter. His popularity only grew this month when his taxi cooperative suspended him for a week for hurting its image. 

Issuing more licenses wouldn’t solve the taxi problem by itself, said Grea. “It’s a prerequisite, but you need a general strategy to improve mobility in Italian cities that incorporates public and private transportation. Solve that and people will see that change is possible.”"

Taxes on consumption do less damage than income taxes

See Youngkin’s Worthy Tax Bargain. WSJ Editorial. Excerpt:

"taxes on consumption do less damage than income taxes. A 2022 Congressional Budget Office study reaffirmed that a broad excise tax is a smaller drag on growth than an income tax that raises the same amount of revenue."

Study: Banning Investors From Buying Homes Leads to Higher Rents, More Gentrification

Home prices were unaffected by a ban on buy-to-rent housing in the Netherlands, but more affordable rental housing disappeared.

By Christian Britschgi of Reason.

"Institutional investors that buy and rent out single-family homes are increasingly scapegoated for driving up prices, gentrifying neighborhoods, and depriving working and middle-class Americans of the opportunity for homeownership.

They've come under fire from liberals like Sen. Jeff Merkley (D–Ore.) and conservatives like Sen. J.D. Vance (R–Ohio).

"In every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices. They're pouring fuel on the fire of the affordable housing crisis," said Merkley last year. He's introduced a bill to tax large investors' purchases of single-family homes.

Several Georgia municipalities in suburban Atlanta have gone so far as to ban build-to-rent housing or otherwise subject it to stricter regulation.

A new study suggests this handwringing is much ado about nothing.

Last week, a team of Dutch researchers affiliated with the University of Amsterdam and Erasmus University released a study on the effects of a new law letting municipalities in the Netherlands ban buy-to-let arrangements. In Rotterdam, the country's second-largest city, officials used the new law to ban investors from purchasing homes in specific neighborhoods.

That allowed researchers to compare home sales, home prices, and the characteristics of new residents between the two types of neighborhoods.

They found that banning investors from buying and converting housing to rentals worked in one sense: The share of investor-owned rental properties in affected neighborhoods fell, and the number of properties bought by first-time homebuyers increased.

On the other hand, however, these new homeowners tended to be richer than the renters they were replacing, and the costs of rental housing increased overall.

"The ban has successfully increased middle-income households' access to homeownership, at the expense of buy-to-let investors. However, the policy also drove up rents in affected neighborhoods, thereby damaging housing affordability for individuals reliant on private rental housing, undermining some of the intentions of the law," write researchers in the study published on SSRN.

The number of homes sold and overall home prices also stayed flat, according to the study.

This cuts against common arguments against investor-owned rental housing: that it's raising prices for everyone else.

Indeed, the Dutch study suggests that institutional investors are playing a productive role in the market by providing rental housing to people who can't qualify for a mortgage.

Another 2022 study likewise found that institutional investment in real estate increases neighborhood diversity by opening up more affordable rental housing options. That study did find that these investors were raising home prices overall.

As The Atlantic's Jerusalem Demsas noted in an essay from earlier this year pushing back on the anti-investor pile-on, these institutional investors are a small portion of homebuyers, owning only about 3 percent of single-family homes.

That challenges the idea that BlackRock's homebuying business is driving major national trends in home prices.

Institutional investors are similar to Airbnb owners and foreign buyers: small, unpopular participants in the housing market that get blamed for high prices caused by a general insufficiency of supply.

Policy makers would do better to look for ways to expand housing supply through deregulation of construction and mortgage finance than passing laws restricting who's allowed to buy a house."

25 holiday Power Facts about energy and climate

By Alex Epstein. Excerpts:

"Annual deaths from climate-related causes (extreme temperature, drought, flood, storms, wildfires) have declined 98% over the last 100 years, even as CO2 levels have risen.

Even though Earth has gotten 1°C warmer in the last century, deaths from cold outnumber deaths from heat by 5-15x. Cold is more dangerous than heat on every continent. Even in especially hot countries such as India, cold-related deaths significantly exceed heat-related deaths.

Near-term global warming is expected to decrease temperature-related mortality, avoiding more cold-related deaths than it will cause heat-related deaths—as it has over the past two decades.

Despite many incentives for global climate-related damages to go up—preferences for riskier areas, government bailouts—GDP-adjusted climate-related damages are flat.

Fossil fuel use is 80% of the world's energy and still growing despite 100+ years of aggressive competition and 20+ years of political hostility and massive solar and wind favoritism.

There is a desperate need for far more of the global-scale cost-effective energy that only fossil fuels can provide near-term: ⅓ of the world uses wood and animal dung for heating and cooking, and 3 billion use less electricity than a typical American refrigerator.

Since 1980, India's fossil fuel use has increased by >700% and China's by >600%. In the same time frame, India's life expectancy increased by 17 years and China's by 14. 

China, which uses mostly coal to produce “green” tech, has over 300 planned new coal plants designed to last over 40 years.

Even nations with little or no fossil fuel resources have used fossil fuels to develop and prosper. E.g., South Korea (83% fossil fuels), Japan (85% fossil fuels), Singapore (99% fossil fuels).

Climate warming is concentrated in colder areas of the world (such as the Arctic), during colder times of day, and during colder seasons. (This means that future warming will occur more in cold situations where it saves lives than in hot situations where it causes problems.)

The most extreme UN sea level rise projections are just 3 feet in 100 years. (This is a completely masterable level.) There are already 100 million people on Earth living below high-tide sea level.

Mainstream estimates say hurricanes will be less frequent and between 1-10% more intense at 2° C warming. (This is not at all catastrophic if we continue our fossil-fueled climate mastery.)

The latest data on global hurricane frequency and intensity (Klotzbach et al 2022) shows no significant alarming upward trend.

It is common for leading media outlets to deliberately misrepresent the flat long-term hurricane trend. E.g., the New York Times cherry-picked a starting point—the low point of 1980—to make a flat trend seem upward.

The National Oceanographic and Atmospheric Administration and the Intergovernmental Panel on Climate Change have made the point that any increases in hurricane frequency in records are likely due to increasing reporting, not actual frequency.

The US Annual Heat Wave Index from the EPA has said, “Longer-term records show that heat waves in the 1930s remain the most severe in recorded U.S. history.” (Today's “reporting” would give you no indication that this is the case.)

Mainstream science is unanimous that the warming impact of CO2 diminishes (“logarithmically”) as it increases in concentration. Every new molecule of CO2 we add to the atmosphere has less of a warming effect than the previous one.

Battery backup for solar and wind is so expensive that just 3 days of global backup using Elon Musk’s Megapacks would cost $570 trillion, about 6X global GDP.

Solar and wind never provide the exact amount of electricity that is needed. Electricity requires exactly matching supply and demand, and solar and wind on their own exactly match supply with demand 0% of the time.

Even mild increases in demand for critical minerals involving solar and wind have led to scaling issues and cost increases. (What will the unprecedented demand increases of “net zero” plans lead to?)

“Net zero” plans to scale solar and wind involve more than doubling the supply of half a dozen major mined materials per decade—even though they can’t point to any examples of  any major mined mineral doubling that fast, even with pro-development governments.

6 days after pledging to go all-EVs, California Governor Gavin Newsom told residents there wasn't enough power to charge their EVs.

80% of the world’s energy is not electricity. For non-electricity energy, solar and wind either can’t do what fossil fuel can—e.g., airplanes or cargo ships—or are far more expensive.

Our dependence on China for key components of solar, wind, and batteries is far greater than our dependence on Russia for fossil fuels.

Far from out-competing fossil fuels, solar and wind are growing fast only when given massive government preferences—mandates, subsidies, and no penalty for unreliability—along with crippling government punishments of fossil fuels."

Unfortunately, as I Warned Lawmakers in March, We May Soon Be Talking About the Nitazene Crisis

By Jeffrey A. Singer of Cato.

"I wrote here in 2020 and here in 2022, and I warned lawmakers in oral testimony here last March, nitazenes might soon displace illicit fentanyl/​xylazine combinations—which are fast displacing illicit fentanyl and its analogs—as the next big drug crisis. Now, a report in the UK Independent suggests my premonition is coming true.

Potent synthetic opioids known as nitazenes—some of which are 500 times stronger than morphine— have been detected in at least 20 postcodes around the UK since September, in a worrying surge in availability, The Independent can reveal.

In the late 1950s, the Swiss pharmaceutical company CIBA created nitazenes to treat pain. This class of synthetic opioids is more potent than fentanyl. The company never brought it to market. However, the World Health Organization reported that isotonitazene was found in toxicology studies in several European countries and the UK beginning in 2019. In September 2022, the Tennessee Department of Health reported that overdose deaths from nitazenes had increased four‐​fold between 2019 and 2021. Drug users in this country refer to the drug as “iso” for isotonitazene.

According to The Independent, all parts of Britain experienced a “big influx” of nitazenes this past summer. London’s Metropolitan Police seized over 150,000 nitazene tablets in a drug haul last October, the largest synthetic opioid bust to date.

A drug testing service reported that, since September, nitazenes were found in 20 samples of black market benzodiazepines (common tranquilizers such as Xanax) that were tested in “every corner of the UK.” A spokesman for the drug testing center said, “People who purchase benzodiazepines wouldn’t necessarily expect them to be adulterated with nitazenes. This creates obvious potential concerns for ill‐​effects or overdose as a result.”

Fortunately, the opioid overdose antidote naloxone also works for nitazene overdoses, though they may require larger doses.

As I wrote last year,

News reports about the growing presence of nitazenes among the mix of street drugs should come as no surprise to anyone familiar with what has come to be known as “the iron law of prohibition.”

An application of what economists call the Alchian‐​Allen Effect, the concept was applied to prohibition (alcohol, cannabis, and other illicit substances) by Richard Cowan in the 1980s, who stated it simply: “The harder the enforcement, the harder the drugs.”

Prohibition incentivizes drug dealers to create more potent forms of the drug that can be smuggled more easily in smaller sizes and divided into more units to sell.

In my testimony before the House Judiciary Committee Subcommittee on Crime and Government Surveillance last March, I stated,

I urge the Subcommittee to avoid doubling down on policies that will not only fail to stem the flow of illicit fentanyl but will fuel the development of more deadly replacements.

I also cautioned the Subcommittee,

Because most health departments have not been testing for nitazenes, we are unaware if nitazenes are becoming more prevalent among black market drugs. Yet, I wouldn’t be surprised if, two or three years from now, we are talking about the “nitazene crisis” instead of the fentanyl crisis.

Sadly, we might be talking about the “nitazene crisis” sooner than I thought."

American small businesses are paying through the roof for regulations

 Clyde Wayne Crews.

"In a new column at Forbes, I take look at the National Association of Manufacturers’ (NAM) update of its report called The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business.

Authored by Nicole V. Crain and W. Mark Crain, the report, via both top-down and bottom-up estimates, finds that overall costs of regulatory compliance to the economy reached $3.079 trillion in 2022 (in 2023 dollars).

That $3 trillion amounts to $277,000 in average annual compliance costs for a typical US firm. The report notes also that per employee costs for the typical US firm is almost $13,000, and that regulations cost the typical US firm around 19% of payroll expenditures.

Small businesses tend to be hit hardest. That unfairness is most prominent in the manufacturing sector, where, for small firms with fewer than 50 employees, the average annual per-employee cost for regulations is assessed at a whopping $50,100. Here’s a breakdown:

As several recent columns have noted, we sorely lack official tallies of such regulatory costs, and there exists a disinclination toward acknowledging them. This disregard is baked in to formal policy, even for rules on a one-by-one, standalone basis. An official estimate for aggregate regulatory costs is non-existent. Crain and Crain are right that “an alternative estimate of the cost of economic regulations is required.”

As it stands, the year 2023 is about to close out with Biden having already delivered the second-fattest Federal Register (it stands at 90,084 pages today, with one more day left in the federal work year).

The 2024-2025 policy debates should elevate regulatory liberalization as well as revive sound assessments of regulatory burdens as priorities. It is clear, though, that Congress will need to step in for either to occur.

Given that an election year begins next week, the Biden administration will be incentivized to get things done, rather than—as America’s small businesses might wish when it comes to regulation—get things undone. 

It’s looking as if changes may need to await a 119^th Congress, but it doesn’t have to be that way. Small business regulatory burdens were the major factor that led to sweeping regulatory reforms in the past."