Thanks for Nothing

The Wall Street Journal reports that, in response to new regulatory rules that reduce overdraft fees, banks may phase out free checking accounts.

So-called consumer advocates succeeded in getting the Obama administration to put restrictions on overdraft fees. In effect, banks were willing to provide free checking in return for earning fees in other ways, such as on overdrafts. So if the government removes one revenue source, the banking industry needs to make up the lost revenue. And since checking accounts cost money to maintain, instituting checking fees is a logical way to cover the cost of maintaining a checking account.

Unfortunately, many lower income Americans benefited greatly from free checking, since it provided a low-cost way to access the financial system. Otherwise, the new account fees will encourage many to close their accounts and keep their money in cash.

This is just another example of how government intervention in the economy creates unintended consequences, often to the harm of the very people the government is trying to help.

Crisis Management

Paul Rubin's column in the Wall Street Journal provides a useful reminder and comparison to the Louisiana-area disasters that befell the Bush and Obama administrations: Hurricane Katrina under George Bush and Deepwater Horizon under Barack Obama.

The leftist media lambasted Bush for not doing more to ameliorate Katrina, ignoring the most profound fact: the law required Bush to provide disaster assistance only after Louisiana's Democratic governor Kathleen Blanco asked for help, which delayed the federal government from providing disaster assistance. One can lament the law, and lament that Blanco was disastrously slow in asking for help, but Bush acted aggressively to provide help when asked.

Obama, on the other hand, is dealing with solely a federal responsibility. His administration has been torn by its need to appease environmentalists, as evidenced its vacillating on the use of chemical dispersant's; by its need to assuage its union supporters, by not suspending the Jones Act which prohibits foreign ships from operating in American waters (the Netherlands has offered to send ships, since they have expertise in cleaning oil spills but needs the law suspended - which is what Bush did for Katrina); and by its need to maintain safety regulations by delaying the use of barges to skim oil until they had sufficient life preservers on board.

And the Academy Award for comedy (or is it tragedy?) should go to Obama for asking movie director James Cameron for technical advice on stopping the gusher because of his experience in filming underwater for his Titanic movie.

And the regulatory failure occurred on Obama's watch.

Instead, Obama's great "contribution" to the disaster has been to use the government's power to coerce BP, outside of a normal settlement process, to pony up $20 billion without going through normal legal channels such as settling a lawsuit.

If you think that's the one good thing Obama has done, realize that all businesses took note of the non-legal assault and will be that much more cautious in growing their businesses. The big reason we are having a jobless recovery in the private sector is the extraordinary uncertainty and fear the Obama administration has created in businesses due to its regulatory, legal, spending, and tax policies. The $20 billion from BP will only add to that fear.

Disturbing, but Not Surprising

The Wall Street Journal reports on an analysis that shows California Hispanics have shifted their already-low affiliation with the Republican further away from Republicans and closer to Democrats in the past four years.

For Latinos who registered in 2002-2006, 23% were Republicans and 50% were Democrats. In 2006-2010, it is 16% Republican and 56% Democratic.

Like it or not, Republicans need to realize the long-term political disaster their perceived hostility to Hispanics will produce: with Hispanics the fastest-growing demographic group in the country, political success will depend on being competitive with Hispanic voters - which means being sensitive to issues which are important to Hispanic voters.

George Bush and John McCain understood this, with their support of immigration reform.

But will the rest of the Republican party?

What are They Thinking?

According to the leftist members of the U.S. Supreme Court, terror groups deserve free speech protection more than American corporations.

In Citizens United v. F.E.C., the four leftist members of the court voted against the majority's decision to overturn restrictions on American corporations and unions from spending money in certain circumstances during elections.

And this week, three of the Court's four leftists (not John Paul Stevens, who voted with the majority) opposed a law that banned providing materials support to foreign terrorist organizations. The leftists are concerned that Americans can't provide advice or assistance to the parts of terrorist groups that engage in "lawful" pursuits.

Instead, the majority made the obvious determination that money and support is fungible, that aiding the "legal" activities of a terrorist group frees up resources for the terrorists to pursue their violent activities.

This makes sense only among the left, who seek political advantage by restricting corporate campaign contributions and who take a more casual attitude toward terrorism.

Speaking Truth to Power

Warren Buffet gave testimony this week to the Financial Crisis Inquiry Commission, which was created by Congress to investigate causes of the financial crisis.

In discussing how Moody's could have been so wrong, in hindsight, about credit ratings on mortgage-backed securities, Buffet said that 300 million other Americans also made the same mistake - including himself.

One of the fallacies behind the desire for giving regulators more power is that somehow regulators didn't have enough authority to stop banks from making bad loans in the run-up to the financial crisis. The various bank regulators have a great deal of power to change the behavior of banks under their jurisdiction - but there is no reason to believe that a regulator will have greater insight into the quality of a mortgage or other investment than the market or Warren Buffet.

In other words, if a brilliant investor like Warren Buffet doesn't see a bubble, why would you think a regulator will see it and, moreover, demonstrate the tenacity to stop what market participants otherwise believe to be reasonable investments?

The real cause of the crisis was the Fed's deeply accommodating monetary policy, and the government's push to get Fannie Mae and Freddie Mac and banks operating under the Community Reinvestment Act to increase lending to weaker credit risks.

None of that is being addresses in the financial regulatory legislation in Congress.

Who Needs Jobs Anyway?

If the price of something rises, do people want to buy more, the same, or less of that item?

If the price of something decreases, do people want to buy more, the same, or less of that item?

From daily experience, the answers are clear: at a higher price, people will buy less; at a lower price, people will buy more.

This Law of Supply and Demand is the foundation of economics.

Unfortunately, when it comes to public policy politicians often ignore this basic concept, no more so than in minimum wage laws.

What minimum wage laws do is raise the price of labor (wages) above its market price. When that happens, it is clear that employers will buy less labor (employ fewer workers). If you think that answer is wrong, go back to the questions I asked above and decide why people would buy more of something that has a higher price.

Unfortunately, the impact of minimum wage laws on raising unemployment is not a theoretical problem. A recent case in point is the experience of Samoa, which as a U.S. territory was on the receiving end of Congress' ongoing payoff to unions. Congress raised Samoa's minimum wage, and in response employers such as Sunkist laid off workers and move production to other locations.

And now that Samoa has skyrocketing unemployment, Congress wants to spend $18 million to ameliorate the unemployment problem it created with the minimum wage law.

Not only is this a further example that government intervention in the economy usually begets further interventions to address the adverse consequences of a previous intervention, but it shows the terrible real life consequences of ignoring basic economics. And it shows the disastrous impact of minimum wage laws, which act to increase unemployment.

Never Forget

This Wall Street Journal column reminds us of one of the key ingredients of the financial crisis: the opposition by Democrats to limiting the size of Fannie Mae and Freddie Mac.

Democrats used the power of the filibuster in the Senate to oppose reforms of Fannie and Freddie, because they wanted those firms to aggressively lend money to subprime borrowers to promote home ownership among poorer Americans. Barack Obama was voted with his fellow Democrats against reforms that would have cut taxpayer losses and lessened the extent of the financial crisis.

In other words, Democratic opposition to reforms were directly related to the cause of the crisis: the extension of too much credit to subprime mortgages. Or as Barney Frank put it, he wanted to "roll the dice" with Fannie and Freddie.

Trillions of dollars of losses later, massive unemployment, government bailouts, the socialization of greater swaths of American industry, and looming massive tax increases are the result.

The Future of Healthcare

Due to lies and disinformation dished out by Obamacare supporters, you might not realize that, in many states, health insurers need state regulatory approval for rate increases.

That's right. Those big rate increases that Obama likes to decry only take effect after state insurance commissions approve them.

Insurance commissions have taken a tougher line recently in approving rate increases, which will ultimately have the effect of driving health insurers out of the marketplace unless the regulators allow rates to reflect rising healthcare costs, which costs will be increasing under Obamacare.

But then again, that is probably exactly what Obama would like to see happen - then he and his supporters will claim that is why a public option is needed. The Democrats have a long history of opposing healthcare reforms that might obviate the need for greater government control (such as the long fight against Health Spending Accounts). Destroying the market for private health insurance is part of the same strategy.

Junk Science

A British medical regulator revoked the doctor's license of Andrew Wakefield, the man who claimed in 1998 that there was a link between children taking the measles-mumps-rubella (MMR) vaccine and autism.

The regulator not only found that Wakefield had accepted payments from a lawyer representing parents who believed the MMR vaccine caused autism, but that he had engaged in unethical behavior in conducting his research - such as taking blood samples from children without appropriate approvals.

Perhaps this case of the junk science surrounding the alleged vaccine-autism link will finally convince all parents of the critical need to get vaccines for their children. Enough kids and parents have suffered from believing otherwise.