Thursday, October 06, 2011

Dink and... Doink

In 2009-2010, politicians (mostly Democratic) went after banks. The CARD act in 2009, Dodd-Frank in 2010, and other laws were passed to restrict various fees and limit interest rates being charged by banks. The obvious result of this was that banks began making a lot less money, particularly in certain areas - for example, banks could no longer charge retailers "swipe fees" for every transaction using their debit cards.

The even more obvious result is that banks, starting with Bank of America, will now charge debit card fees of $5 per month. Whoops!

Here is what inherently bothers me about how people stupidly approach regulations: There is never an end to them. Unless you completely restrict all free choice and eliminate the free market (and there are those who advocate this... as long as it's not for them), there is no way to "control" the market. People and companies do things and create primarily because it is worthwhile for them to do so. As soon as it ceases being worthwhile, they will stop. This is not "evil". This is reality. 

The shortsighted approach people and politicians have when it comes to how regulations impact the economy is mind-boggling. I recently was reading about GOP Presidential candidate Herman Cain, and was pointed to video of a 1990s town hall meeting on President Clinton's healthcare plan, where then pizza company CEO Herman Cain challenged the effects of President Clinton's proposed plan on businesses such as his own. While Clinton's handle on the subject was solid, Cain was quite masterful in showing that for most businesses the impact would be quite harsh... and even though Clinton suggested passing that cost on to customers (!), that simply would not be enough, nor would smaller or midsize companies be able to compete long enough with the largest ones in that situation. 

Let's forget for a minute that restricting freedom is wrong. What happens when a rule is made? There is a reaction. And if that reaction does not fit perfectly into the rule-makers' designs? Another rule is made... and this goes on forever, never solving the original problem fully while creating entirely different sets of problems along the way. In the comments to the last post, Vox Populi and I were having another positive and interesting debate, and one of the features was an aside on whether government should support people's post-high school educations. He was of the opinion that we could make college completely free for all, and this would service us better as a country. I strongly disagree for many reasons, and some of these are obvious objections, but for fun, we debated how this would work.

Essentially, what would end up happening in such a scenario (and I'm going to exaggerate on this, don't take it too seriously) is that there would be created a myriad of rules, as the response to every flaw in a rule is simply creating another rule: College education is free, to help people get a leg up in society. But, we don't want people going to school forever and never contributing, so we'll cap it at two degrees. But what if someone's first degrees don't work out or become obsolete? We'd have to make an exception. But then others would take advantage of this exception. Plus, what about people going to medical school? And what if someone is demonstrably better, and getting this third degree would help them contribute more? But that wouldn't be fair to the other person who didn't grow up with some of those advantages. But maybe we shouldn't support people who aren't going to contribute as much? Or maybe we should cap the number of people in each major? Or perhaps we should create a board which determines who should go into what field based on the skill sets they currently have. Also, now that we have X number of X major, but there aren't enough jobs for them, that would be a waste of taxpayer resources, so we should force companies to hire these students. The extra expense could be a tax credit to those businesses, picked up by the taxpayers. ...and so on. Meanwhile, costs would continue to skyrocket with no real value added - certainly not a value worth the cost. 

A good example of value not worth the cost was the "stimulus", and another good one is President Obama's latest jobs proposal. Essentially, he wants to spend about $450 billion dollars, which would hopefully create about 2 million jobs. Essentially, the cost per job created would be $200,000 per job. How is that logical? I'm unemployed - I'll take $100,000, stop collecting unemployment, and government can keep the difference, is that a good deal? I'm betting that 4.5 million unemployed people would take that deal - how would that impact the unemployment rate, you think?

The silly approach of ignoring the consequences of regulations and other approaches within government needs to end. Instead, it's used to vilify individuals and corporations for doing what actually makes sense given the cards they are consistently being dealt by reality and government.

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