Government regulations and the effect on the economy

[Fern]

If you consider the cost not to be the most important issue
-snip-

- wolf

Just so you know, I'm not ignoring you here. I typed out a lengthy detailed response, but lost it somehow.

I'm too lazy to do it again.

Fern

 

[1prophet]

Are you seriously advocating against banning conflict minerals because it costs money to use ethically sourced materials?

It's not a "foreign policy initiative". It's fucking right and wrong. The newly moral relativist right wing makes me sick.

United States has no moral or ethical grounds to ban conflict materials from African countries like Congo when it looks the other way when products from countries like China and Mexico are given a free pass even though those two countries have some of the worst environmental, labor, and worker safety rules compared to the USA, Canada, Europe, etc.

And believe it or not since China is getting more involved in Africa for raw materials you will end up with those materials in products that due to current regulations won't be sourced from the US.

 

[trenchfoot]

United States has no moral or ethical grounds to ban conflict materials from African countries like Congo when it looks the other way when products from countries like China and Mexico are given a free pass even though those two countries have some of the worst environmental, labor, and worker safety rules compared to the USA, Canada, Europe, etc.

And believe it or not since China is getting more involved in Africa for raw materials you will end up with those materials in products that due to current regulations won't be sourced from the US.

Sounds like a recipe for the next global conflict after all the oil is gone from the middle east and raw materials for industrial "prosperity" become the next thing to get greedy about.

 

[Zorkorist]

The cost to business to build the infrastructure needed in Africa makes that not 'cheap'.

There are two basic things nations are exploited for: natural resources and labor.

With Africa, it's resources. With parts of south America - like Chile's copper or Venezuela's oil - it has been as well.

Sometimes, they're mixed. Also in Chile, under Pinochet, there were American corporate factories, with barbed wire keeping workers in, patrolled by armed security forces, where people suspects of labor organizing or other subversion were hauled off the work line outside the building and tortured where screams could be heard by the workers.

Elsewhere, there have been things like the major fruit companies who have cheap labor that delivers the resource of fruit - with a lot of violence and repression involved, these companies paying security forces, partly to combat criminals and others who attack them, partly to prevent any labor organization.

The Congo has its people in utter poverty send their children into extremely dangerous labor collecting natural resources, which everyone else profits from, starting with the black markets that smuggle the resources out of the Congo to avoid paying the taxes. It's a terrible tragedy and injustice.

'Free trade agreements' are largely about helping corporations of high-wage nations more easily outsource the labor they can.

Sometimes it can actually bring some money to the poorer labor; it has an overall downward pressure on global labor prices.

It's not raw materials, that are being bloodied in Africa, but the overall disdain, disinterest, distrust, that bloodies the people of Africa.

African's Government are so weak, their population so uneducated, that Governments and Corporations have their way. The people think they exhibit strength, by raping women, kidnapping foreigners, etc., but really it just shows their desperation.

The travesty is first (and second and third) world nation's that are just fine with raping Africans weakness. Because Africa is such a dangerous place, they justify isolating themselves from the community, the people, and therefore the people do not benefit from their wealth.

It's clear that people are taking advantage of the Africans, and feel no remorse.

Shame on them.

-John

 

[soulcougher73]

Yeah we should just cut companies lose to do as they please to rape and pillage our lands and people. God forbid you know where your product comes from.

 

[Siddhartha]

Because of heavy metal, PCB, etc contamination of the Hudson River it is recommended that no one eats any fish caught in that river. About five years ago it was recommended that adult men eat no more than one fish a year from that river.

I know a guy who daily fishes the Hudson River.

There are short term and long term costs. Short term it was very cost effective for GE and GM to dump their industrial waste into the river. At the time it was legal to do so. In the tong term the region will be paying the cost of the contamination for 100's of years. I do not know how to calculate the costs of the lost of the Hudson River fisheries and the health effects due to the contamination.

 

[fskimospy]

We see many claims here that govt regulation is burdening our businesses/economy, many argue it isn't so.

We see claims that companies are hoarding money and just being greedy, others have said they are holding off because of uncertainty.

Below is an example of burdensome and expensive new regulation that is contributing to the uncertainty. This new regulatory provision, not expected to be finalized until later this year, was stuck into the Dodd Frank bill which ostensibly about domestic banking reform. Why/how does stuff about the Congo and rebel groups belong in there?

For some reason it's hard to find this stuff in the mainstream media, it's been pretty mush ignored (except a few reports here and there about the unintended humanitarian problems this is causing - some will just stop doing business with them.)

It's a fairly long article, so I've only quoted part below.


http://www.cfo.com/article.cfm/14586443?f=search


So, we're running expensive foreign policy initiatives off the backs of our companies and we wonder why none want to come here, and those that are here keep leaving.

But never mind this stuff, let's keep painting schools and filing potholes' that'll fix our economy.

And nah, companies don't need to keep funds in reserve for complying with this new stuff, they can just blow their money now and borrow more if needed next year like the fed govt.

Fern

So how does this prove your assertion? You just proved that regulations exist and that they have costs. Your claim is that businesses are choosing not to invest due to uncertainty about the regulatory environment, which is a very different thing.

Can you show that businesses in more heavily regulated industries are investing significantly less of their stored cash? Can you show that businesses which anticipate significant regulatory hurdles in the future are investing significantly less to account for this cash hoarding? Can you show a correlation between regulatory costs imposed by governments and investment which would even remotely account for this disparity?

Of course you can't. I sincerely doubt you've even bothered to look. But hey, why would that stop you from drawing a fact free conclusion? People consistently try to find excuses as to why economic performance is poor that conform to their ideological bias, when it's really just economics 101. Bad demand = no expansion.

 

[ConstipatedVigilante]

Tell you what, let's go back to the days of Love Canal and you be the first to drink the water.

http://en.wikipedia.org/wiki/Love_Canal

Read the article, troll. The chemical company clearly explained the danger and did not want to sell the property. The school board insisted despite knowing the danger.

 

[Fern]

-snip-
Can you show that businesses in more heavily regulated industries are investing significantly less of their stored cash? Can you show that businesses which anticipate significant regulatory hurdles in the future are investing significantly less to account for this cash hoarding? Can you show a correlation between regulatory costs imposed by governments and investment which would even remotely account for this disparity?

Of course you can't. I sincerely doubt you've even bothered to look.

Yes, I've seen it in surveys of CFO's. Regulatory uncertainty is listed (as are uncertainty due to inflation or a double dip recession etc.).

I'm presently working under a fed tax deadline and don't have the time to search the internet for you, but when it's passed (and if I remember) I'll search for an online copy.

Personally, I guess because I work in business, I don't see how it's in anyway difficult to understand that regulatory uncertainty, including the uncertainty over the cost of of complying with said regulations, would compel those in charge of cash flows to create a 'cash cushion' (cash hoarding) for budgeting purposes. it's just common sense really.

Fern

 

[fskimospy]

Yes, I've seen it in surveys of CFO's. Regulatory uncertainty is listed (as are uncertainty due to inflation or a double dip recession etc.).

I'm presently working under a fed tax deadline and don't have the time to search the internet for you, but when it's passed (and if I remember) I'll search for an online copy.

Personally, I guess because I work in business, I don't see how it's in anyway difficult to understand that regulatory uncertainty, including the uncertainty over the cost of of complying with said regulations, would compel those in charge of cash flows to create a 'cash cushion' (cash hoarding) for budgeting purposes. it's just common sense really.

Fern

You're probably talking about the Duke CFO survey: http://www.cfosurvey.org/

The CFO's surveyed cite government regulations as an impediment to hiring (which of course they are, because they increase costs). You know what they say is inhibiting them far more than everything else however, more than doubling the next closest factor? Consumer demand. When you're talking about common sense, the actual common sense answer here (along with the macroeconomics 101 answer) is that if there aren't people buying your product, that's a bad recipe for expansion.

Of course businesses will keep SOME cash to prepare for compliance costs, but your argument wasn't that such a thing happens at all (which is indeed common sense) but that it is THE reason, or at least the primary reason for the lack of investment we are seeing. The evidence simply doesn't support that in any way, shape, or form.

 

[woolfe9999]

Just so you know, I'm not ignoring you here. I typed out a lengthy detailed response, but lost it somehow.

I'm too lazy to do it again.

Fern

NP. I hate it when that happens to me. I was going to let you have the final word anyhow since I my last post was a huge WoT and I was about done discussing the subject.

 

[Fern]

-snip-
Of course businesses will keep SOME cash to prepare for compliance costs, but your argument wasn't that such a thing happens at all (which is indeed common sense) but that it is THE reason, or at least the primary reason for the lack of investment we are seeing. The evidence simply doesn't support that in any way, shape, or form.

I've never said it is the only or primary reason.

Here and elsewhere I've listed it with other types of uncertainty that work to compel 'hoarding' for safety cushion purposes.

But regulatory uncertainty is undoubtedly a big concern of corporations and their CFO's. Bills such as Dodd-Frank and Obamacare were thousands of pages long, with many more thousands expected as the regulations are 'fleshed-out'. We're still finding new and unexpected stuff in them. E.g., I doubt many manufacturers initially thought they'd face new regulations under a Dodd-Frank banking bill.

And the concerns are apparently sufficient enough that Obama felt compelled to give a speech on it recently. And in the speech, at least the excerpts I've read, he didn't deny that regulations were a legitimate concern, to the contrary actually.

Fern

 

[woolfe9999]

Let's return to the difference between estimating the nominal cost and the economic cost. The SEC's document purports to estimate the cost of compliance. Whether they are close or not, let's just say they are likely on the low side, even if they are within range. The larger systemic effect is that even though Congolese minerals are not prohibited by the regulations, they will effectively be banned due to the inordinately high cost of compliance associated with legitimately sourced Congolese minerals. For some minerals this could have significant impacts on the market price faced by manufacturers and retailers who are subject to these rules. We can debate whether or not that cost is worth it or not (that's a separate issue), but the undeniable fact is that these larger costs are not accounted for in the SEC's numbers.

Much of this post assumes that I am standing on the SEC's estimate as accurate. I'm not particularly wedded to it and I would assume it's probably low.

The only other point I want make here is regarding the paragraph above. You have a good point but once again I have to point out that the compliance measures do not have to be that onerous because, if I am reading the proposed reg correctly, the business can determine its own definition of "reasonable country of origin search." The only downside is that they have to publicize their degree of diligence alonside their findings on a website. Nothing that I can see would stop them from including in that statement a remark about how expensive an extremely diligent inquiry would have been, thus mitigating some of the negative PR. This strikes me as a rather large loophole in the reg which may make it not very costly but also rather worthless in achieving its purpose.

 

[woolfe9999]

I wouldn't say that the CBO deliberately slants its conclusions to appease those in power. Rather, their prescribed methodology is very easy to game. For example, an easy way to get a bill's cost to come in low is include some future cuts or tax hikes before the end of the ten year window that are guaranteed (practically speaking) to be cancelled. The CBO is prohibited from considering whether anything being legislated is, in fact, likely to happen.

I don't know that there is a good solution to this other than lots of transparency (which it pretty much has right now). I shudder to think how a CBO-like body would operate if it were given more discretion over its estimates. I think it would then become much more politicized. As it is now I think the CBO does a very good job of doing what it is told to do: which is produce estimates based on deeply flawed assumptions that they are not allowed to second guess.

Yes the CBO operates on the principle of GIGO, garbage in, garbage out. However, this proves nothing that would substantiate any blanket statement about the predictive value of its work. That would have to be done by comparing its assessments with whatever reality transpires over time. While there is no question that CBO estimates can and sometimes are gamed, we have to establish that there is an empirically proveable pattern that said gaming is biasing its projections in favor of whatever legislation is proposed. That in theory is quite provable one way or the other but remains unproven AFAIK.

 

[werepossum]

Because of heavy metal, PCB, etc contamination of the Hudson River it is recommended that no one eats any fish caught in that river. About five years ago it was recommended that adult men eat no more than one fish a year from that river.

I know a guy who daily fishes the Hudson River.

There are short term and long term costs. Short term it was very cost effective for GE and GM to dump their industrial waste into the river. At the time it was legal to do so. In the tong term the region will be paying the cost of the contamination for 100's of years. I do not know how to calculate the costs of the lost of the Hudson River fisheries and the health effects due to the contamination.

We still have some of those in Tennessee. One meal a month equals none at all for me, thanks.

This is a good illustration of the difference between MY costs and someone else's costs. It's also a good illustration of why we don't eliminate all regulations that cost business money. Some of those regulations are stupid, but many are vitally important.

 

[werepossum]

Why do people buy into the moronic paradigm that "regulations" as a whole have a specific kind of effect? The issue is what kind of regulations, not how much. The whole over/under-regulation discussion is a red herring designed to keep the public incapable of having any meaningful input to public policy.

The question ought to be what we want our regulations designed to do. Some people truly are anarchists and for them arguing against over-regulation might make sense. Most people aren't but have been hoodwinked into thinking that all regulations are an equal force for evil. Lots of people have a vague notion of what they call a "free market" which, they have heard off and on, delivers something that is efficient or optimal (although most people who use this term have no idea what that even means). These people especially are stooges in this whole discussion. Yes, some markets do achieve a reasonable approximation of a truly competitive market. Many others (large ones at that) do not. Where there are strong incentives to engage in price discrimination, hide information, profit from unpriced externalities, or deceive customers, there is a need for robust regulation in order to achieve a closer approximation to the "free market" that so many people extoll.

Now there are many other types of regulation, designed for many purposes other than efficient market function. They are less defensible from economic grounds, and more appropriately addressed in a purely political context. I've got an opinion about them, but it's not really the topic of this thread...

When a pundit talks in broad strokes about the need to "get rid of regulations", the evils of over-regulation, or on the other side, the need for more regulations to fight those evil anarchists, they are trying to get you to suspend your cerebrum and pick a side based on your gut instead. With so many intestinal appeals, is it any wonder this country is going to shit?

Very good point. We have very bad regulations that cost little, very bad regulations that cost a lot, very good regulations that cost little, very good regulations that cost a lot but are worth it, and a buttload of regulations that are in between or largely unknowable. And sometimes good regulations, such as those of the EPA Obama just set aside, that are probably good but not advisable at the moment.