consumers

Sugar Program Opponents Stake Out Their Position

by Fran Smith on September 30, 2010 · 3 comments

in Agriculture, Economy

Sugar producers got a sweet deal in the 2008 Farm Bill. Now, with the next bill scheduled for 2012, some opponents of the U.S. sugar program are already positioning themselves for another battle over one of the most egregious examples of central planning that raises prices for consumers and costs jobs.

On September 29, 2010, Rep. Joe Pitts (PA-16) introduced a bill — The Free Market Sugar Act — that takes direct aim at the sugar program administered by the U.S. Department of Agriculture.  Here’s Pitts’ statement:

The USDA sugar program is a needless waste of government money that is actually counterproductive to the goal of creating jobs in the U.S. Using taxpayer money to back loans to the sugar industry and buy sugar should not be a function of our federal government. Since the program actually raises the U.S. price for sugar, we see some food industry jobs shipped overseas.

Sugar producers are using the public backing to pocket healthy profits. The American people are fed up with bailouts, and my legislation would stop public money from propping up companies that should be providing for themselves.

Other policy makers were taking their own steps to focus attention on sugar and the next farm bill.  Congressmen Danny Davis (D-IL) and Mark Kirk (R-IL) sent a “Dear Colleague” letter to their fellow members of Congress asking them to sign on to a letter to the House Agriculture Committee leadership.  The letter points out some of the major problems with the program that need to be corrected in the 2012 farm bill:

The U.S. Department of Agriculture is keeping sugar prices at all-time highs by limiting the amount of sugar that can be grown in the United States and imported each year to meet domestic needs.  The sugar program is being run solely for the benefit of sugar growers and processors, with complete disregard for consumers and other sugar users.  The net result is that consumers are paying more for food products and workers are losing jobs at food processing and manufacturing plants.

It’s good that they’re starting early to position this issue, because they will be facing the sugar lobby, one of the strongest lobbies on the Hill — that day-in-an-day-out focuses on this one issue and spreads their largesse in a bipartisan manner.

See some of CEI’s earlier articles on the sugar program here and here.

More Mercantilist Claptrap

by Fran Smith on August 27, 2010

in Economy, International, Trade

No wonder people are confused about the trade issue when they read mercantilist articles like the front-pager by Howard Schneider in the Washington Post today – “Economic growth slowed by trade gap.”

According to this article’s premise, it sounds like we would all be better off if we just exported and didn’t import any goods and services.  Here’s the article’s lead sentence:

A widening U.S. trade deficit has become a substantial drag on economic growth as the country’s exports struggle to keep pace with the swelling sums that Americans are again spending on imported goods.

And then it goes on to say:

But the spike does raise fresh concerns about whether some of the same factors that led to the economic crisis, including U.S. overconsumption, are beginning to reemerge. The yawning deficit may also prove frustrating for the Obama administration as it seeks to create jobs by boosting U.S. exports.

But what about choices?  Does the U.S. produce everything we consumers – and producers — want and need at prices we can afford?  Of course not.   And therein lies the confusion, as with this assertion:

At a basic level, trade deficits represent a loss of wealth for a country – money flowing abroad for goods and services produced elsewhere, supporting businesses and workers in other countries.

I would offer that the lack of imports would also “represent a loss of wealth” for consumers and producers.

Cato’s Dan Griswold points out a major oversight of the Post writer – he ignores the fact that many of those “overconsumed” imports actually provide inputs for producers to use to produce goods for export!

That view neglects the supply-side role of imports. More than half of what we import consists of goods consumed by producers-capital machinery, raw materials, parts and other intermediate inputs. Those imports help us produce more, not less. The Keynesian view also confuses cause and effect: Imports usually grow in response to RISING domestic demand. Consumers more eager to spend “swelling sums” on imports typically buy more domestically produced goods as well.

Imports, when they represent less expensive alternatives, also may put more discretionary funds in the hands of consumers to purchase other goods or services, to save, or to invest.

Maybe some Post editor noticed some of the problems with that article – a different trade article with a coauthor is on the front page of the online edition.

Class Action Lawyers Ripped Off Their Clients, With Approval From Federal Judge

by Hans Bader on April 26, 2010

in Legal, Personal Liberty, Politics as Usual, Sanctimony, Zeitgeist

Class-action lawsuits all too often benefit only the lawyers, not the allegedly victimized consumers they claim to represent.  The Center for Class Action Fairness takes aim at such abuses.

Today, it filed a brief with the Ninth Circuit Court of Appeals “appealing a district court’s controversial approval of a class action settlement where attorneys recovered a $850,000 fee for themselves despite failing to provide any benefit to the class.” The lawsuit, “In re Bluetooth Product Liability Litigation, No. 07-ML-1822, alleged that three manufacturers of Bluetooth headsets for cell phones committed consumer fraud because consumers might not be aware that extensive use of headsets at high volume could cause hearing loss. Before the district court could rule on a pending motion to dismiss, the parties settled, with $100,000 going to charity, minor changes to defendants manuals and websites, and $850,000 to the attorneys — an 850% contingency fee. The purportedly injured class members received nothing.” Despite objections, “the district court approved the settlement and the entirety of the fees.”

In short, the lawyers ripped off their clients, with the trial judge’s blessing.

Earlier, I wrote in the Washington Post about how class-action lawsuit “settlements intended to benefit consumers get paid instead to groups that lobby for affirmative action, hate-crimes laws, undocumented immigrants, and public funding for abortions.”  (See Hans Bader, “Not Their Money to Give Away,” Washington Post, December 22, 2007, at A16).

The Washington Post similarly lamented how federal judges use such settlements for purposes unrelated to the underlying lawsuit, giving the money to “religious organizations,” “law schools,” and other organizations that “hire lobbyists” to influence judges  (See Editorial, “When Judges Get Generous,” Washington Post, December 17, 2007, at A20).

The practice seems to be even worse in state court than federal court.  As I noted in 2007, “In California state court, leftover money from a consumer class action settlement is commonly given not to consumer groups, but to groups that have nothing to do with consumers, like the left-wing La Raza Legal Center; the politically correct Employment Law Center of the San Francisco Legal Aid Society (which seeks to curb employers’ First Amendment rights); the ever-litigious Lawyers’ Committee; and groups that specialize in advocating affirmative action, broader definitions of ‘hate crimes’ (at the expense of civil liberties), or expanded access to welfare programs for illegal aliens. This ripoff of consumers is magnified as a result of practices like ‘fluid recovery.’”

Lee Doren on Glenn Beck discussing “The Story of Stuff”

by Richard Morrison on September 23, 2009 · 1 comment

in Video, Zeitgeist

[youtube:http://www.youtube.com/watch?v=MEkpVXv0SYs 285 234]

Another Hoover on trade?

by Fran Smith on September 15, 2009 · 1 comment

in Economy, International, Trade

President Obama’s slapping of tariffs on tires imported from China is the latest in a series of protectionist moves by the U.S. that threaten the world trading system, risk retaliation by the U.S.’s largest foreign creditor, and ultimately harm consumers.  A Wall Street Journal editorial today titled “A Protectionist President” points out that Obama’s trade stance could be following in the disastrous footsteps of President Hoover.

The reality is that without the U.S. leading by example, the world trading order is likely to deteriorate into every country for itself. This is especially dangerous amid a global recession in which world merchandise trade volume fell by roughly 33% from the second quarter of 2008 to June 2009. Reviving trade flows is crucial to restoring global growth.

Mr. Obama may not intend to start a trade war, but then Hoover didn’t set out to pick one either. His political abdication is what made it possible, however, and trade passions once unleashed can be impossible to control. On his present course, President Obama is giving the world every reason to conclude he is a protectionist.

The Chinese have said they may retaliate on the tire tariffs by restrictions on U.S. chicken and auto parts.  That indeed could escalate to the detriment of U.S. manufacturers and producers and the jobs they maintain.  But U.S. consumers, especially lower-income consumers, could face immediate and substantial increases on lower-cost tires, many of which come from China.  Some tire distributors estimate that the cost of a $50 tire could rise to $85.  Since U.S. manufacturers mainly produce higher-priced tires, this protectionist move will do virtually nothing  for U.S. jobs in the tire industry, except perhaps appease the trade unions, especially the United Steelworkers, which have been clamoring for more protection.

Government health care monopoly–not in consumers’ interests

by Fran Smith on July 9, 2009

in Healthcare, Nanny State, Personal Liberty

dmvRegina Herzlinger, chair of Harvard Business School, in National Review takes on health care and the Obama Administration’s arguments that a government-run plan would increase competition, provide more choice, and lead to greater cost efficiencies:

But before we get swept away, let us remember that these health-insurance markets would be monopolies run by government, two characteristics that normally do not enhance consumer welfare. Picture the efficiency of your Division of Motor Vehicles, for example.

Also consider government-run monopoly liquor stores. Despite their ability as the single payer to extract better volume discounts from wholesalers than private liquor chains can, their prices are not lower than private stores’. Additionally, they slight consumers through shorter operating hours, inconvenient locations, limited brand availability, and inadequate advertising. By forcing consumers to adjust their shopping habits, they raise prices through loss of time. Although some advocates hope that these features limit liquor consumption, this is not the case.

The results attained by government-run health-insurance markets in Massachusetts and the Netherlands provide equally cautionary evidence: Such markets limit competition, do not control costs, discourage entrepreneurial efforts, and thus cause consumer dissatisfaction.




Credit card debt drops in February

by Fran Smith on April 7, 2009 · 1 comment

in Economy, Odds & Ends

The latest figures on consumer credit from the Federal Reserve show that consumers are hunkering down, especially on credit card debt. Revolving credit outstanding – mainly credit card debt – fell at an annual rate of 9-3/4 percent in February 2009 from the month before. Revolving credit outstanding fell from $963.5 billion in January to $955.7 billion in February. Pools of securitized assets based on credit card debt fell from $448.1 billion to $440.3 billion. These balances are no longer carried on the books of the credit card issuers.

Delinquency figures on credit cards for the last quarter 2008 rose but in a range near the four-year average, according to the American Bankers Association. Their latest survey showed that credit card delinquencies increased from 4.20 percent to 4.52 percent — the four-year average is 4.47 percent.

Credit Card Price Controls Harm Consumers

by Fran Smith on December 18, 2008 · 6 comments

in Legal, Nanny State, Politics as Usual, Regulation

The Wall Street Journal editorial got it exactly right:

The Federal Reserve cut rates to historic lows Tuesday, but today it plans to vote to tighten consumer credit — taking away with one hand what it gives with the other. On the agenda is a rule-making that would impose, for the first time, what amount to federal price controls on credit cards.

That’s what the Fed’s proposed amendment to Regulation AA would do. In changes pushed by consumerist groups and grand-standing lawmakers, the proposal would tell banks how to divide payments on a credit card account when there are different balances on that account. The changes would also prohibit card issuers from increasing the interest rate on an outstanding balance even if the borrower is less creditworthy. And the proposed rules wouldn’t allow banks to charge consumers for going over their credit limit if it’s because of a hold on the account for an expected cost, say, of a hotel or a rental car.

In trying to lower their credit card exposure risk, banks have already tightened up their requirements for issuing credit cards. They’ve also cut credit limits of lots of borrowers. This new proposal will tighten up credit even more and shift the increased costs to the good borrowers — those who stay within their limits and make their payments by the due date.

Guess who’s been one of the big advocates for these changes? No other than Rep. Barney Frank (D-MA), who also pushed for Fannie and Freddie to expand their portfolio of high-risk mortgage loans in the name of the Community Reinvestment Act. We all know what came of that policy.

CEI Partners with NTU to Launch BeyondBailouts.org

by Cord Blomquist on October 22, 2008 · 3 comments

in Bailout Watch

Did the free market cause the financial crisis?  Was it unbridled capitalism?

The Competitive Enterprise Institute and the National Taxpayers Union don’t believe for a minute that capitalism caused the financial crisis.  How can we be so confident?  Because capitalism doesn’t exist in the United States, especially in the financial sector.

Nearly every industry in the U.S. finds itself making regular pilgrimages to Washington to seek special favors—subsidies for this or that, regulations that harm competitors or smaller firms, or trade deals that benefit their industry while hurting the American consumer.  No, America doesn’t have a capitalist system, we have a system of special favors, handouts, and perversion of the free market.

That’s why we’ve launched BeyondBailouts.org.  The financial system should be a free market one, not one controlled by the government, because government control and influence over the financial system is to blame for much of the current crisis.

Freddie Mac and Fannie Mae bought up bad loans, pushing the industry to make more of them.  The Fed played fast and loose with monetary policy by making money so cheap that financiers used it recklessly.  Our tax policies and myriad Federal programs are geared toward pushing people into homes they can’t afford.  Many of these policies were put into place by corrupt politicians bankrolled by those who sought to make a fast buck while distorting the free market.

Tell Congress enough is enough.  Write your Member of Congress and sign our petition at BeyondBailouts.org.