Josh Cohen - Congress yet to Reauthorize U.S. Export-Import Bank for Funding

Congress still has not yet committed to authorizing the United States Export-Import Bank for funding, an unprecedented move in the bank’s 80-year history. The bank’s main function is to provide financing for foreign companies in order to allow them to purchase U.S. goods and make deals with U.S. companies. Every five years, Congress has the option to reauthorize the bank for funding. Generally, the decision to fund is met with minimal opposition, but this year, politicians are arguing that the funding through U.S. taxes is simply a way of stealing taxpayer money. Many Republicans are claiming that the fund is nothing more than a form of corporate welfare. Politicians favoring a halt in funding have been quick to point out questionable tactics by the Ex-Im Bank, particularly that the bank tends to play favorites when making loans, helping out the larger corporations as opposed to the smaller ones. The debate presents yet another distinct divide between the two national parties, as most Democrats are leaning in favor of reauthorization.

This issue particularly hits home, as Florida is the state with the most to lose should funding not continue. The bank funding creates 70,000 jobs for Floridians, providing a very important segment of the economy. Florida unemployment, which is on par with the country as a whole at about 6%, has been steadily decreasing since the recession. A blow like this has the ability to hurt Floridians even further. Florida is not the only state that is taking hits due to the stalling in the reauthorization of funding. FirmGreen is a California company that has been inventing and commercializing new energy technologies and boosting the California economy for some time now. Steve Wilburn, the CEO of FirmGreen, testified at a House hearing in June that he lost a $57 million deal to a Korean competitor. The potential client claimed that the financing terms being offered were not up to par with the offers from the Korean Ex-Im bank, although the technologies offered by both were considered on par with one another. Overall, this issue is just another that illustrates the inefficiency of Congress and its overall inability to complete tasks due to bipartisanship and an unwillingness to cooperate among politicians.

Jason Chiu: New Healthcare Laws May Force Americans to Shop Around

            With the Affordable Care Act in place, many of its users may find it wise to seek other healthcare insurance options, before renewing the plan under the act. Although the system is set up to encourage Americans to renew the policies they bought last year, recent data analysis from the McKinsey Center for U.S. Health System Reform shows that many premiums are being raised by double digit percentages within many of the most popular healthcare plans available. This forces Americans to make a tough call: bite the bullet and pay the higher premium to keep the same doctor and hospital coverage or risk losing this to save some money; the downside being that the cheaper plans often provide a more limited coverage group of doctors and hospitals.

            Overall, the average increase in price of a silver plan (must cover 70% of average patient’s medical costs) has gone up 8.4%. However, there needs to be further refinement in this study to get a more accurate picture of what is going on. The McKinsey database collected information from only 18 states and Washington, D.C. Hopefully, as more data is released, researchers can provide an even more accurate account of these rates. Going forward, many feel that despite the marketplace being more elastic than ever before, few will actually mobilize and return to the marketplace to find a new plan. However, if these rates continue to increase, it will be very interesting to see how the health insurance market is affected.

Groundwater Legislation

The extensive drought that has plagued California for the last several years has finally resulted in reform in regards to groundwater management legislation. On Tuesday, Governor Edmund G. Brown Jr. signed a trio of bills that will strengthen the management of groundwater basins, which are extremely critical for the state’s water needs.  This is the first time in California’s history to have its water supply managed on a larger scale, and has been the only Western state without existing legislation to determine that in spite of the fact that it has faced record breaking droughts and water shortages. Previously, water was considered a property right and landowners were able to pump as much water as they needed from the ground, which led to the emptying of basins faster than they could be filled naturally.

Even with this new management structure, it could still be decades before the state’s most depleted basins recover all the water used. The bills aim to speed up this process in three parts. The first, SB 1168 by Senator Fran Pavely instructs local agencies to create management plans. The second measure by Assemblyman Roger Dickinson establishes when the state government can intervene if the local groups cannot sufficiently do their job of managing the water supply.   Finally, the third bill also by Pavely aims to alleviate some of the concerns of farmers by postponing the state’s action in certain places where surface water has been affected by ground water pumping. In spite of this effort to appease California farmers who are most affected by the water supply shortage, many are still upset by the bill and the limitation of water use. The president of the California Farm Bureau Federation went as far as to t say that “the bills may come to be seen as ‘historic’ for all the wrong reasons” by harming food production capabilities.

In a signing statement, Brown declared that he would also allow for legislative adjustments in following sessions to help reorganize the process in which courts determine groundwater rights.

Brian Wolgast Blog Post #1: Spike in Agricultural Supply

               According to current projections, the 2014 harvest of major field crops such as corn and soybeans might approach records for largest harvest in American history. While this might sounds like a good thing as farmers will be able to sell more, the unfortunate truth is the opposite for these farmers as prices have dropped sharply since the planting of said crops. While economically, we would expect a supplier to supply more at a higher price, the favorable weather created a shift in supply to the left.  As a result, farmers will now be willing to sell greater quantities at the same price that they would have sold their crops in years past. That being said, prices have decreased sharply.  Farmers in the Corn Belt have been selling for about $3.35 per bushel on average as opposed to the $4.50 price in March, and more than $7 from a year before that. While the harvest this year might be larger than the norm, this is not to say that it is anywhere near 50% larger than usual. The price drop is instead a result of an inelasticity that exists in the in both the supply and demand of this market; meaning that farmers will still offer close to the same amount of grain despite large price drops or increases and consumers will most likely purchase similar amounts of such a good regardless of any hikes or drops in prices.  Experts on the matter say that this will have long term effects on top of the less profitable short-term. They believe that decreased asset pricing, as well as the inevitable tightening of monetary policy by the Fed, these farmers will also see their land decrease astronomically in value.

                This spike in supply does however appear to be great for consumers as experts are predicting “easing” in prices of margarine and cooking oils. This of course is due to the idea that despite drops in prices, they will still consume similar amounts as prior to the drop and therefore be able to consume a higher level of “all other goods.”  On top of the consumers, livestock producers will benefit from these lower prices as they will have an easier time feeding said livestock.  This is to say that the price drops don’t have negative implications for the entire farm sector.

Sources: http://bismarcktribune.com/news/columnists/ed-lotterman/bumper-crop-is-bummer-for-some/article_b6915aea-3903-11e4-96e3-001a4bcf887a.html

Public Transit Inefficiencies

The ubiquity of urban sprawl, congestion, and pollution have brought about massive federal subsidies of public transit systems in US cities. The recipients of the subsidies, however, have not always produced the most efficient transportation systems. The public transit systems in New York, Atlanta, and D.C., for example, are drastically less efficient in terms of ridership, externalities (traffic), costs, and size than those of Western Europe. A \$132 million streetcar project in D.C. promises to increase traffic congestion (because trolleys will share the street) and travel at an average of 12 mph along the 2.4 mile route. Compare this to Cleveland's 6.8 mile rapid transit bus system costing $50 million. The picture only gets worse considering the bus system in D.C. runs the same routes as the trolleys at a higher speed, lower cost, and greater passenger capacity. Something is not right.

Considering the incredible inefficiencies in the public transit system, some have argued that public transportation should not be so heavily subsidized by the government. More efficient systems develop when they sustain themselves through user revenue (e.g. subway or bus fares). However, the extremely high fixed costs of public transit systems and extremely low marginal costs tell us that user fares, presumably equivalent to marginal costs, would simply not generate enough revenue to be sustainable. Price discrimination, in which the poor pay less than the rich per ride, might be one way to solve the problem, some suggest. Regardless of the public-private debate, local government officials must create more effective, efficient systems considering externalities, realistic ridership rates, and substitute goods. Unfortunately, doing this might prevent them from receiving targeted federal subsidies of particular transit systems (that are often inefficient) like the one in D.C.

Emma Catlett

Sources:
http://www.economist.com/news/united-states/21611123-federal-subsidies-have-inspired-some-silly-transit-projects-rolling-blunder
http://www.businessinsider.com/the-right-way-to-subsidize-public-transit-2013-4

Illinois Right-to-Work

A recent study by the Illinois Economic Policy Institute shows the right-to-work policies in Illinois and other states around the country have detrimental effects on public budgets and local economies, and even lead to lower wages. As background, right-to-work policies are those that seek to ban unions and employers from negotiating contracts. The current split between right-to-work and unionized states is 24-26, respectively. The researchers found that right-to-work really creates a "right to work for less." These laws decrease wage and salary income by an average of 3.2, and actually increase poverty rates among workers about about 1%. There is also a large taxation mismatch in right-to-work states, with workers contributing about 34.8% of all state and federal taxes, while receiving 41.9% of benefits in America. This creates quite a strain on local government budgets.

In Illinois, the right-to-work controversy is seen as one of the key talking points in the upcoming gubernatorial race. Republican candidate Bruce Raynor claims to have a problem with union bosses, but because of the controversy surrounding right-to-work laws, he has been reticent to blatantly advocate for them. The key issue here seems to be that while unions are good for some, they are bad for others. Similary, right-to-work laws are good for some and bad for others. The employment diversity in large cities like Chicago make it difficult to have one blanket policy for labor markets. For this reason, Raynor has discussed a policy of "right-to-work zones," where different localities can choose the type of labor policies they want to enact. I believe this is a very effective solution to a problem that is difficult to solve; different socioeconomic groups populate different regions, so those who benefit from unions live together, and those who do not live together.

For Illinois in particular, the numbers show that a blanket right-to-work policy would have an extremely detrimental effect on the state's economy. For Bruce Raynor, this means an interesting and very inflammatory debate about union policies in his home state - debate that is likely to grow to the national scene.

- Zach Dubrof

California recently became the second state with paid sick days. The law requires California businesses to allow employees at least 3 sick paid days a year. Californians "no longer have to sacrifice their health to avoid missing work and losing income," said State Sen. Ricardo Lara." How do you think this law will affect workers incentives to come into work/ work hard at all? Furthermore, do you think it is necessary in order to help workers health and help worker turner or do you think the cuts too deep into a company's bottom line and is too instructive into a company's labor policy? 


-Adam Gooodwyn