Topic: Regulatory Studies

America Threatened as Never Before

The Justice Department is on the job.  Perceiving a dire threat against the American republic, they have acted to keep America safe.  As my colleague Sallie James noted yesterday, they are stealing confiscating the money of Internet gamblers.

Reports Richard Morrison of our friends at the Competitive Enterprise Institute:

Just when it seemed that those in power had begun to think about Internet poker in a positive light, the Department of Justice throws us back into the digital dark ages by seizing $34 million in funds rightfully owned by around 27,000 online poker players. The government is alleging that the funds are associated with illegal online gambling and money laundering.

In a letter sent to Alliance Bank, the prosecutor said accounts held by payment processor Allied Systems Inc. are subject to seizure and forfeiture “because they constitute property involved in money laundering transactions and illegal gambling offenses.” The letter was signed by Arlo Devlin-Brown, assistant U.S. attorney for the Southern District of New York.

Knowing that the federal government is busy violating our privacy and grabbing our money to save us from ourselves just makes one feel great to be an American

Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler

My son’s station car is an old Ford Explorer AWD which, despite being a V-6, was rated at about 15 mpg.  Approaching 100,000 miles, the SUV’ s resale value is very low.

The House approved a bill to give him a $3,500 voucher to buy a car that is supposed to get only 18 mpg, or $4,500 if it gets 20 mpg.  Only 18-20 mpg?  That’s not moving us much closer to President Obama’s pie-in-the-sky 35.5 mpg goalpost is it?

Consider how easy it would be to game this giveaway program by using that $4,500 voucher to buy a big SUV or V-8 muscle car.

First of  all, with Chrysler and GM dealerships folding, it should be easy to buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the voucher.

What you do next is sell that boring econobox, even if you end up with $1,000 less than you paid – that still leaves you with $3,500 of free money, courtesy of taxpayers.

As this  process unfolds, the flood of resold small cars will make it even  harder for GM, Chrysler and Ford dealers to get a decent price for small cars, because of added competition from new cars being resold as used.

That’s their problem, not yours.

So, take the $9,000 net from reselling the crummy little car plus the $4,500 from Uncle Sam.  Then use that $13,500 to make a big down payment on a used Cadillac Escalade,  Toyota Tundra pickup or Corvette.

File this under “unintended consequences” (my own file is running out of space).

Online Gambling: According to the Feds, You’ll Be Holding Today

From The Wall Street Journal today, an article about the federal freezing or seizing of 27,000 online gambling accounts (including that of one of my colleagues, who shall remain nameless but is $150 short today).

I blogged a few weeks ago about some (admittedly very dim) light on the horizon so far as the freedom to gamble online is concerned, but this is a setback indeed. The Poker Players’ Alliance (a lobby group for online poker players) says this is the first time that players’ accounts (as opposed to the gambling site operators themselves) have been targeted.

U.S. laws  against gambling online, and the way those laws are administered, are an affront to personal freedom and a threat to our trading relationships.

FDA to Regulate Tobacco? Big Mistake

Handing tobacco regulation over to the FDA, as Congress is poised to do, is an epic public health mistake. It is tantamount to giving the keys of the regulatory store to the nation’s largest cigarette manufacturer, Philip Morris.

The legislation that will be voted on shortly in the Senate was cooked up out of public sight by Philip Morris, Sen. Ted Kennedy, Rep. Henry Waxman, and anti-tobacco lobbyists. Philip Morris staffers themselves even wrote large portions of the bill.

There are significant, and numerous, problems with the FDA regulating tobacco, and virtually no benefits to public health. Kennedy, Waxman, and the public health establishment present their legislation as a masterful regulatory stroke that will end tobacco marketing, prevent kids from starting to smoke, make cigarettes less enjoyable to smoke, and reduce adult smoking. But FDA regulation of tobacco will do none of these things.

The bill fails to correctly identify the reasons why young people begin to smoke, and concentrates almost exclusively on restricting tobacco marketing, while leaving the other risk factors for adolescent smoking unaddressed. There is nothing in the proposed legislation that shows the FDA understands the well-documented connections between education, poverty and smoking status, connections that provide the key to helping adults stop smoking.

Obama’s FCC Pick to Seek Internet Regulation

Politico reports that President Obama’s nominee to head the Federal Communications Commission, Julius Genachowski, is expected to pursue “ ‘net neutrality” regulation of broadband Internet service.

In his paper, The Durable Internet: Preserving Network Neutrality without Regulation, Tim Lee shows why regulation is not needed to preserve the good engineering principle he calls “end-to-end.” His paper also shows how regulation intended to serve consumer-friendly ends is often captured and used by regulated industries to suppress competition and artificially raise profits, denying consumers the benefits of free markets.

GM’s Nationalization and China’s Capitalists

GM’s restructuring under Chapter 11 includes plans to sell off the Hummer, Saab, and Saturn brands. Well, just one day after GM’s bankruptcy filing, a Chinese firm has come forward with a $500 million offer to purchase Hummer. The prospective buyer is Sichuan Tengzhong Heavy Industrial Machinery Co Ltd, a manufacturing company in western China, which hopes to become an automaker.

Not only is the Hummer offer the first bid for a GM asset in bankruptcy, but the bidder is foreign. Not only is the bidder foreign, but Chinese. And not only is the bidder Chinese, but the Hummer was first developed by the U.S. military. Thus, this is certain to be characterized as a national security matter, and the Committee on Foreign Investment in the United States (CFIUS) will have to review the proposal. There should be little doubt that the economic nationalists will be out in full force, warning CFIUS against transferring sensitive technologies to Red China.

Let me offer two quick points, as the bulging veins in my temples pulsate with disdain for official Washington.

First, if this deal is rejected (even if the bidder is scared away by detractors), any remaining credibility to the proposition that the United States will once again become that beacon on a hill, exemplifying for the world the virtues of free markets and limited government, will vanish into the ether. There has been too much U.S. hypocrisy on free trade and cross-border investment and too much double talk about the impropriety of government subsidizing national champions, that another indiscretion in a high profile case will blow open the already-bowing flood gates to economic nationalism worldwide. Considering that U.S. companies sell five times as much stuff to foreigners through their foreign subsidiaries than by exporting from the United States, investment protectionism is as advisable as nationalizing car companies.

Second, the willingness of this Chinese company to purchase Hummer serves as a stark reminder of what could have been. Had George W. Bush not allocated TARP money to GM last December, in circumvention of Congress’s rejection of a bailout, then GM likely would have filed for bankruptcy on January 1. At that point, there would likely have been plenty of offers from foreign and domestic concerns for individual assets to spin off or for equity stakes in the New GM. There would have been plant closures, dealership terminations, and jobs losses, as there is under the nationalization plan anyway. But taxpayers wouldn’t be on the hook for $50+ billion, a sum that is much more likely to grow larger than it is to be repaid. It is also a sum that will serve as the rationalization for further government interventions on GM’s behalf.