A story posted on by Heather Cherone at DNAInfo Chicago highlights a point I’ve been making for some time. State and local governments chronically overestimate the taxes they’ll realize from increases:

CHICAGO — The good news is that Chicago’s effort to keep plastic and paper bags out of area landfills by imposing a 7 cents-per-bag tax is succeeding beyond officials’ wildest dreams.

The bad news is that the success of the fee in dissuading shoppers from taking single-use bags means the city’s coffers are taking a steep hit.

Chicago officials balanced the city’s 2017 spending plan based on an assumption that the city would earn $9.2 million this year from the tax.

But that assumption appears to have missed the mark by at least $1.5 million based on data complied by the city through June 18.

In debating the 7 cent per bag tax the stated reason was to reduce the number of plastic bags used by Chicagoans. In other words if it were completely effective the city would realize no revenues from the tax. That rationale didn’t stop the city from including the tax in its budget projections.

To some people $1.5 million doesn’t sound like a lot but it’s a 15% shortfall. That’s a substantial gap for a city whose tax base is declining and whose bonds are teetering on the edge of junk status. And it’s the same error the county and city made when they increased the sales tax and the same error the county is making in imposing a steep tax on sugar-sweetened soft drinks.

I have not bought a single plastic bag since the city imposed its tax. It was an avoidable expense so I avoided it. Other Chicagoans are clearly doing the same thing. The tax on bags is a regressive one so the likelihood is that it’s falling hardest on the poorest Chicagoans.

Contrary to the beliefs of state and local government officials incentives matter and taxes have consequences. Wages do not magically rise to match tax increases. An increase in taxes will either reduce consumption or savings.

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At the New York Times Robert Frank attempts to explain why health care prices are lower under single-payer systems:

Total costs are lower under single-payer systems for several reasons. One is that administrative costs average only about 2 percent of total expenses under a single-payer program like Medicare, less than one-sixth the corresponding percentage for many private insurers. Single-payer systems also spend virtually nothing on competitive advertising, which can account for more than 15 percent of total expenses for private insurers.

That’s true. But Canada’s Medicare system has costs of administration of around 15% while ours are around 25%—down from a high water mark of about 30%. Said another way, don’t expect a single-payer system in the United States to have administrative costs of 2%. A cost something in between 15% and 25% is probably more realistic. Said yet another way: don’t expect converting to a single-payer system to cut costs dramatically.

The most important source of cost savings under single-payer is that large government entities are able to negotiate much more favorable terms with service providers. In 2012, for example, the average cost of coronary bypass surgery was more than $73,000 in the United States but less than $23,000 in France.

That “negotiate” is a tricky word. Can anyone cite an example of any other country negotiating lower prices from providers other than pharmaceutical companies? I can’t. Drugs account for about 8% of U. S. health care spending. You could cut those to the bone and it wouldn’t result in tremendous savings overall. There’s a lot of squawking about high drug prices because they account for a lot of the out-of-pocket spending by the elderly but you’re not going to realize big savings from that direction.

I can think of examples of other countries dictating prices to providers but not negotiating them down. High health care prices in the U. S. are a direct consequence of an unwillingness by American politicians or public health care administrators to negotiate substantially lower prices. Claiming that they will is an extremely strong assertion that deserves some proof. I wish Mr. Frank would provide it.

You’d also need to believe that providers will accept pay cuts. Cutting prices for individual line items on the tab isn’t enough; you’ve got to keep the line items the same or trim them back, too. I see no reason to expect any of those things to happen and they need some substantiation, too.

As long as providers think they should be earning high salaries, patients insist on getting all of the health care that they want, and neither politicians nor public health care administrators will chaffer prices down, I don’t think it makes much difference whether we have a single-payer system in the U. S. or not. Prices will remain higher and continue to rise, more than we can afford.

The sad truth is that health care prices are high in the U. S. because we won’t cut them.

I don’t need to explain why the death of the internal combustion engine has been greatly exaggerated, Volvo’s announcement that it was getting out of the internal combustion engine business notwithstanding. Chris Isidore has already done it for me at CNN Tech:

The first reason is profitability. The stock of tiny Tesla (TSLA) may be worth more than either General Motors (GM) or Ford (F), but it has yet to report an annual profit. Traditional automakers are making billions of dollars selling millions of gasoline-powered cars each. No one has yet figured out a way to make a profit selling electric-only vehicles.

Here’s a little quiz question. At the present rate of electric vehicle sales when will there be no more internal combustion vehicles on the road? Answer: never.

159,000 EVs were sold in 2016. In comparison a total of 17.5 million light vehicles were sold. That’s a 1,000-fold difference.

Let me try another way of explaining it. Sales of EVs are not doubling every year. But let’s assume they were. If they were it would take six years for EV sales to equal sales of non-EVs. If EVs maintain a 38% increase every year it will take 12 years for EVs to equal non-EVs in sales. The time to turn over the entire fleet is 20 years.

In other words it is unlikely that I’ll ever see a time when EVs are the majority of cars on the road let alone the only cars on the road. And that’s assuming the present rate of increase and all of the technical and logistical problems are solved.

I found the infographic sampled above summarizes the interesting article at Defense One on the lessons learned in the battle for Mosul. I sincerely hope that one of the lessons isn’t it ain’t over ’til it’s over.

I just love this picture of the leaders assembled for the meeting of the G20 countries. It tells you everything you need to know.

One of these things is not like the others.

I was prepared not to like it but I found an important kernel of truth in James R. Rogers’s post on America’s “new socialists” at the Library of Liberty and Law. Here’s the snippet that I think bears consideration:

My suspicion is that most Americans still don’t resent really rich people. They may envy them, but we don’t resent them. In market economies people can get rich without making other people poorer. And while living standards for most Americans haven’t increased much over the last generation, they haven’t decreased either.

Where there has been a shift, however, has been a transfer in risk, particularly a shift that places more risk on the American middle class. While there can be multiple causes, this transfer of risk to the American middle class accounts, I think, for much of the angst that has made Americans more willing to identify as “socialist,” at least in the weak sense of socialist, of support for broadening and strengthening government systems of social insurance.

The emphasis is mine. I think he’s on to something. Many of us are anxious with good reason. An enormous percentage of American even prosperous Americans live paycheck to paycheck. And I think that one thing that divides the middle income from the wealthy is risk aversion.

Consider the Affordable Care Act, for example. It is a risk transfer program. It does not transfer risk from the poor to the rich. If it had it might have received strong popular support than it has but it also would never have been enacted into law because the rich would have mobilized against it. As constructed it transfers risk from the sick to the well, from the young to the old, and from the not actually poor to the not nearly rich.

The poor have always been insecure. But the middle income being insecure is relatively new.

Risk has been transferred from employers to workers and from the rich and poor to the middle income. I would conjecture that the uncertainty doesn’t just pertain to the economic sphere but to the social and other sectors as well. Something to think about.

or peak indexing. I was fascinated by the implications of Jared Dillian’s article on the effects of indexing in investing at Bloomberg View:

Indexing is screwing up a lot of things. This is not news. Equity investors focused on bottom-up, fundamental analysis have been complaining for years about how hard it is to make money. They complain about valuations being too high and out of whack with reality. They complain about how the market goes up every day. They complain about how things don’t make any sense. The stock market has entered Bizarro World, and nobody really knows why, but they suspect that this is all somehow related to indexing, which, as a strategy, has attracted trillions of dollars in assets under management.

In quantum mechanics physicists have found that even passive observation, paradoxically, can change the phenomena that are being observed. In other words if a tree falls in the forest and there’s no one there to hear it, it may still make a sound but it could be a different sound.

I did a little quick investigation and learned that the economic effects of indexing is tremendously under-studied. I did manage to find one paper on the subject by Jeffrey Wurgler. The graph at the top of this post is from the paper.

My speculation is that I think I can see at least two effects of stock market indexing and the associated passive investment on the general economy. I think it reduces business investment and that it results in boosting prices of some stocks at the expense of others.

I don’t think that Ed Morrissey is looking at the big picture in his call for Congress to end the August recess at The Week:

There seems to be little reason for the August recess except as an escape, and the timing of it is particularly questionable. Every year, Congress has to pass a budget, an enormously complicated set of negotiations between 535 elected officials on Capitol Hill and the president at the other end of Pennsylvania Avenue. Does it make sense to have a five-week gap in that process within a month of the deadline?

As long as Congress isn’t in session the republic is safe. As Will Rogers once quipped, the difference between death and taxes is that death doesn’t get worse when Congress is in session. I just wish they took longer recesses and much more frequently.