Tag Archives: Regulations

Oh For Pete’s Sake

I’m late on this; it’s been in my stack for awhile now.  But what in the world can be gained by the government suing Intrade?

Today, Americans were told that they must close their Intrade.com accounts. That happened because the federal government agency known as the “Commodity Futures Trading Commission” (CFTC) today sued the prediction market, where people from all over the world bet about things like who will win elections.

Intrade decided all its U.S. customers must now close their accounts and withdraw their money from the site.

I’m sure someone somewhere feels that I, the wilting consumer, must be protected from myself, but seriously.  How is this good?

What law are they breaking?

In English: the government says that many of the things Intrade allows people to predict – everything from what the price of gold will be in the future to whether the U.S. will go to war soon – are legally considered “commodity options,” and that Intrade broke the law because it isn’t licensed to trade those. The penalty is $140,000 per violation.

So, just get a license:

Why doesn’t Intrade just obey the complicated law and become a licensed exchange? They tried, but the CFTC won’t give them a license. When an established, licensed U.S. commodity exchange applied for permission to do what Intrade does, the CFTC turned them down, too.

The pompous CFTC enforcer claims that the regulation “is important for a number of reasons, including that it enables the CFTC to police market activity.”

This is the perfect microcosm that is the state of government today.  And Stossel sums it up perfectly:

Please. These regulations don’t help police market activity. When people make money on Intrade, Intrade sends them the money. There are no allegations of fraud. Customers are happy with Intrade, judging by increased activity on the site (over $50 million was bet about whether Obama or Romney would win.)

The market polices itself.

In a sane world, government would focus on preventing fraud, not on crushing innovative ideas.

Stossel goes on to point out that this isn’t just a democrat or republican problem, rather it’s the mindset that gentle flower that is the rugged American needs protection from …. from something, surely.  And THIS is the state of our future that I fear.  How to prove to, to convince, people that the future may not be “bad” with these rules, but it certainly is less better.

Government Regluations: New York Soda

By now we’ve all heard about Mayor Bloomberg’s plan to ban large sizes of drinks that are high in sugar or calories.  This would include soda, energy drinks and sweetened teas.

New York City plans to enact a far-reaching ban on the sale of large sodas and other sugary drinks at restaurants, movie theaters and street carts, in the most ambitious effort yet by the Bloomberg administration to combat rising obesity.

The proposed ban would affect virtually the entire menu of popular sugary drinks found in delis, fast-food franchises and even sports arenas, from energy drinks to pre-sweetened iced teas. The sale of any cup or bottle of sweetened drink larger than 16 fluid ounces — about the size of a medium coffee, and smaller than a common soda bottle — would be prohibited under the first-in-the-nation plan, which could take effect as soon as next March.

This has to be a clear cut example of what the government CAN do, but what it SHOULDN’T do.  There’s no question that American are getting bigger and becoming obese at alarming rates.  There is no question that eating/drinking less garbage and working out more often would greatly contribute to reducing this problem.

However, at some point, there has to come a time when the government oversteps its bounds.  Are we really ready to accept living in a state where the state can dictate such personal freedoms?  Perhaps we are.  We already accept the fact that we can’t smoke in certain places.  We acknowledge and accept that the government can dictate seat belts and motorcycle helmets.

As much as I’m appalled at the regulation of soda-pop, I am equally sure that most of our citizens will accept it and we can just chalk it up to another example of people eschewing personal liberty in the name of removing any semblance of personal responsibility.

Government Adds To The Cost Of Medical Care

One of the for profit hospitals in the Raleigh area is Wake Med.

WakeMed Health and Hospitals is a 870-bed healthcare system with multiple facilities placed around the metropolitan Raleigh, North Carolina area.  WakeMed’s main campus is located on New Bern Avenue in Raleigh, North Carolina. WakeMed serves multiple counties throughout the state and specializes in a variety of services including cardiology, neurology, orthopedics, high-risk pregnancy, children’s care, trauma, physical rehabilitation and critical care transport.

In addition to providing the above services they also have emergency rooms.  And being a for profit entity Wake Med is looking for ways to improve the efficiency of medical care delivery.  And they have a solution.

Continue reading

Food And Medical Care

During the hearing of Obamacare, the news was full of analysis.  One of those pieces, in the “USA Today”, made a point that food is more of a basic need to people than healthcare:

A brief submitted by 215 economists argues that food is even more basic to survival than health care…

I was struck by this last night as I was cleaning out some of my “stack” in my office last night.

See, the food delivery market, while not perfectly so, is a free market example of how goods can be distributed efficiently.  Based on demand and the profit motive, food stuffs are delivered to a literal market where individual shoppers are allowed to “ration” themselves based, in part, by how much money they have and what types of services they want.

For example, in my market I can by generic chicken soup, Ramen noodles and rice.  Or, I can walk 50 feet away and purchase hand rolled sushi, fillet mignon, $60 wine and lobster.

As a real example of the power of markets I picked up this flier:

For $5, this profit driven market is offering a meal that feeds 4 people, perhaps more if the kids are younger.

If medical care were subject to the same market forces you would see the same thing happen with the cost of medical care.  In the same way, if you allowed health insurance to be impacted by the same market forces, you would see prices of health insurance react in the same manner.

It’s only when government intercedes, by mandating acupuncture coverage, or by restricting the sale of insurance polices across state lines, that you see the price of a good or service go up.

Differentiation: A Job Growth Policy

 

When filling a position in an organization, the hiring manager is looking to find the best candidate for the job.  She is not looking for the most deserving candidate for the job.  Neither is she looking to even some perceived ratio of some undeserved population.  That is, maybe there are fewer long haired hippies in the corporate American culture than in the general American culture; it’s not the job of the manager to correct that woe.

Rather, she is looking for the candidate best suited for the job.  And to that end, she can, and should use, any tool or “discriminator” she has at her disposal.

Continue reading

Government Regulations: Preventing Job Growth

Most likely since regulations “began”, there have been folks that feel we need more of ‘em; we can’t sell rotten meat you know.  And there have folks that would have fewer of them; no one would buy rotten meat you know.  My position certainly falls nearer the “fewer are better” side of the ledger.

However, I will admit that there is a line.  Independent of what side of the “regulation debate” you come from, an earnest party to such a debate must realize that a couple of things:

  1. There is an extreme position.  On BOTH sides.  That is, there is an extreme amount OF regulation and an extreme LACK of regulation.
  2. There comes a point when one must admit he is approaching that line.

So, I get the point that taken to far, my position could become an extreme one, and unsustainable.  I happen to think that’s the “feature” of the way in which we build our laws; no one person gets to decide.  However, be that as it may, the point this morning isn’t to try and debate whether certain regulation is too much or too little, rather, it’s to point out the impact of regulations once applied.

Consider, for example, a recent letter from the EEOC, The Equal Employment Opportunity Commission, regarding the requirement of a high school diploma for employment:

The “informal discussion letter” from the EEOC said an employer’s requirement of a high school diploma, long a standard criterion for screening potential employees, must be “job-related for the position in question and consistent with business necessity.” The letter was posted on the commission’s website on Dec. 2.

Employers could run afoul of the ADA if their requirement of a high school diploma “‘screens out’ an individual who is unable to graduate because of a learning disability that meets the ADA’s definition of ‘disability,’” the EEOC explained.

Independent of whether or not one agrees with this direction from the EEOC, that is, not being within the rights to require a high school diploma for employment, the fact remains unequivocal:

The “regulation” will result in fewer jobs.  Employers hiring for low skilled or entry level positions will be that much more leery of facing a discrimination lawsuit than they may otherwise have prior.  And THAT will result in some of them delaying or outright canceling of a job opening.

The result of very well intention and noble altruism is that the new law, rule or regulation will cause more harm to and discriminate against the very target population that it was meant to assist.  This is true in exactly the same way and measure as minimum wage laws harming the very people it attempts to help.

Public vs Private Regulations

As part of legislation, Congress made it illegal for banks to charge a certain percentage to merchants when a debit card was swiped.  As a result, the merchant was able to retain more of the purchase price, but the bank lost a segment of its revenue; profits were threatened.

Because banks don’t enjoy profit margins significantly above the average, they have to work to retain whatever margin they DO have.  This means that the lost revenue from debit card swipes paid via the merchant would have to be made up elsewhere.

Banks began to end free checking.  They even began to add $5.00 fees for using a debit card for purchases.  The banks changed the way and manner in which they billed individuals based on indiscriminate legislation.

Now consider Verizon.  The telecommunications giant introduced a $2.00 fee for electronic billing to certain customers.  There was o regulation that forced this move, no change in laws.  Verizon simply felt that they need to move revenue in a specific segment.

Customers were enraged.  And Verizon changed course and ended the charge:

Verizon Wireless bowed to a torrent of criticism on Friday and reversed a day-old plan to impose a $2 bill-paying fee that would have applied to only some customers.

The consumer vitriol, which cascaded across Twitter and onto blogs and petitions all around the Web, struck a chord with a company that was clearly not expecting it.

“The company made the decision in response to customer feedback about the plan, which was designed to improve the efficiency of those transactions,” Verizon Wireless said in a statement referring to the reversal.

Companies risk capital in an effort to produce a product or service that the consumer wants.  In return for this risk, investors desire a return on capital.  If they fail to obtain this return, they move their capital somewhere else.  Therefore, it is incumbent for a company to look to improve revenues in any way they can.  And if those methods fail in the market place, shrewd companies will adapt.  Inefficient companies will fail.

And all of this is achieved through the free market.  Not one of government control.

Markets: Controlling Them And How They React

Some time ago airlines would price their tickets in whatever manner they priced their tickets.  We would buy them through travel agents or, if we were daring, but them from the airline directly.  Over time, and with emerging technology, we became good at finding deals.  I still remember my dad calling from Minnesota on a Tuesday, telling me he was coming to Seattle that Thursday.  See, Northwest would blowout sale their empty planes to certain destinations.

Downside?  No lead time.  Upside?  Retired teachers with nothing to do get to see family often and cheap.

Then we discovered “aggregaters”.  These were the engines on line that would allow you to shop all the airlines at once.  You know, trevlocity, orbitz, expedia, whatever.  And the airlines, and is, LOVED it.  It not only made it easier to shop, but by posting price, airlines were forced to compete ’cause whenever people have a choice to fly from Dallas to Fargo with all things being equal, they choose, wait for it, the lowest price.

So, right after WE figured that out so did the airlines.  In response to the demand for cheaper and cheaper seats, they had to find ways to bring the TICKET price down but still make the profit margin they were used to.  See, it turns out that orphans and grandmothers don’t invest their trust funds in mutual funds that buy companies that don’t turn a profit.  I know I know, the greed surrounding orphans and grandmothers is gross, immense and very ugly, but alas, that is the nature of orphans and grandmothers.  Anyway, so the airline decoupled the price of a person and the price of a piece of luggage.  Now the ticket prices for their seats would be lower and we would buy those cheaper tickets.

Nothing else changed.

The total cost, over time, of flying remained the same, only now it was two line items, not one.  Wanna fly from St. Louis to Bangor?  $375.00 please.  Or, if you want, I can split that up and charge you $340.00 for the ticket and $35.00 for the two bags.  No change, just accounting.

Annoying?  Perhaps, if you’re less enlightened.  Or, if you’re like me you try not to pack things that you can buy at your destination.  Diapers, formula, flip flops…whatever.  Or, you learn to pack better.  Or, you ship your luggage, it might actually be cheaper.  Or, just maybe, you accept the fact that the price of luggage is really the price of admission and just deal with it.  Where I really hate this is when I’m behind the guy that wastes 40 minutes trying to shuffle items from one bag to another to get under the 50 lb limit.  Anyway, enough.

The point?

The point is that lawmakers actually think they can make things better.  Baggage fees a pain in the neck?  Make ‘em illegal:

WASHINGTON One of the most loathed aspects of holiday air travel – paying to check bags – is at the center of a growing debate that does not look to be resolved soon. Travelers who could otherwise be spending $50 on an extra gift must instead use it to buy their Samsonite a round-trip ticket in the bowels of an airplane. The anger over increasing fees has gained the attention of Washington, pitting some members of Congress against the airline industry.
U.S. Rep. Larry Kissell joined other federal lawmakers last week to press airlines to scale back their baggage fees. Kissell, a Democrat who represents Charlotte and Concord, proposed legislation that would allow travelers to check one free bag on each flight. U.S. Sen. Mary Landrieu, D-La., introduced a similar bill in the Senate. To date, no Republicans support either bill.
All fine and dandy, I guess.  But I wonder if these lawmakers are aware that flying people from Kissimmii to Detroit [why ANYone would fly from Florida to De’troilet is beyond me] costs real money and that by making it illegal to charge real money for one thing means that it raise the price of the other legal thing.

If congress wants to choose higher airline tickets over free baggage, that’s fine.  I guess.  I just wonder why congress feels that decision is up to them?

Obama And His Anti Business Administration

Add another one to the mix:

The Federal Trade Commission has informed Minneapolis-based manufacturer Graco that it is challenging the the company’s planned acquisition of a unit of Illinois Tool Works, saying the proposed deal would hurt competition and lead to higher prices.

The agency said it is seeking to maintain competition in markets for key industrial finishing equipment and has issued an administrative complaint against Graco, Illinois Tool Works and ITW Finishing seeking to stop the proposed $650 million cash deal.

Graco announced the proposed acquisition last April. The companies make industrial liquid finishing equipment, which is used to apply finishes to manufactured products like cars, wood cabinets and appliances.

The FTC said the proposed deal would lead to reduced innovation for the North American manufacturers who rely on this equipment.

“Liquid finishing equipment is critical to manufacturers,” Richard Feinstein, director of the FTC’s Bureau of Competition, said in a release. Only three significant competitors sell and service it in North America, with Graco and ITW together dominating this field.”

Obama says that he loves capitalism.  He acts like he doesn’t.

Business Friendly Administration

Obama may be the least business friendly President we’ve had in my lifetime:

Washington — Federal regulators have delayed the proposed merger of Duke Energy and Progress Energy late Wednesday, setting back into plans to merge the two North Carolina-based utilities by the end of the year.

How many corporate deals has this man’s administration destroyed?

Off the top of my head:

  1. Duke-Progress merge
  2. AT&T – TMobile merge
  3. Pipeline
  4. Boeing
  5. Obamacare

That’s just 5.  Right here with little or no thought.

I often tell people that America and being “American” is more of an ideal than a real descriptor of one’s nationality.  For example, if you say he is a “Japanese” you will know that he is a man born and raised in Japan.  His heritage is Japanese.  Same for a German or a Mexican.

But when you say he is an American you can not assume him to have been born in America.  Nor can you assume race or historical nationality.  Rather, American means that quality that embraces the pioneer, the risk taker the lover of freedoms and Liberty.  It is an ideal of hard work results in hard rewards.  Of all the nationalities that one could be, American conjures the bootstrap.

Obama is not American in that sense.  And in that way and measure, when he says he is going to fundamentally transform America, I believe him.