Tuesday, October 12, 2010

Exemptions vs. Equality under the law

As in most legislation, there are intended consequences. When you manipulate the marketplace, it is hard to predict what the ripples will effect, but the ripples that the new health care bill has created are already staring to reveal themselves, and were not a surprise to many detractors that were sounding the alarms during the debates.

McDonald's announced in late September that it was going to drop health coverage for it's workers due to increased costs created by the new health care regulations. Since then, they have received an exemption from the law, as well as 29 other businesses and teacher unions.

Instead of acknowledging the failures of a policy, legislators provide exemptions to the law. A law is very rarely repealed when it does not work as planned, instead of repeal, the legislators choose to create new legislation to address each of the unintended consequences, resulting in a very complicated and viscous cycle of legislation.

Our Governor, Jennifer Granholm does the same in Michigan when she is forced to face the reality of the unintended consequences of her policies. She never repeals those policies, instead she provides exemptions.

Exemptions fly in the face of equal justice and create an environment in which each individual is subject to different laws. She acknowledges that businesses are drawn to Michigan when their taxes are lowered, but has a huge spending habit and a distaste for across the board tax cuts. Instead of lowering taxes, she approaches each individual company and offers them each their own tax bribe. This results in a few businesses choosing Michigan, only after she incurs a huge monetary cost and time investment to seduce these companies into our state.

Why create the need for individual deals, exemptions and negotiations rather than repealing the cause of our economic illness? Why does our government insist on treating the symptom rather than cure the disease? I argue it is pure pride and human nature... People do not like to admit failure!! Instead they seek to make it illegal and immoral to react to the marketplace incentives they create, or they carve out personal exemptions.

Jennifer Granholm also views each of these tax credits, ironically, as lost revenue, when in reality, each dollar she receives is greater than the zero amount she would get if they were not here at all, which would be the reality if the bribes were not offered or accepted. Instead of gratitude and appreciation, the reward these businesses receive for creating jobs in Michigan is constant threat from our state government that their negotiated tax 'deals' will be taken away.

If she were to create an environment that was equally attractive for all business, then businesses would flood into the state without the time and money she needs to travel and set up meeting with each business's board of directors, etc. They would "magically" appear all on their own.


Businesses are often demonized for completely legal responses to market incentives, one of the most common is moving jobs overseas. Jobs moving overseas are just a symptom of market incentives created by legislation. So, who is the bad guy? Who needs correcting? The businesses or the laws, or both? This concept will be further discussed in a post regarding the unintended consequences of the minimum wage.

Also, here is an article that is completely off-topic

Demystifying Deflation

Before you hail the Fed and Uncle Sam as our economic saviors, there are two things you should understand about the wrenching deflation we face: 1) The conditions which make us ripe for a severe deflation were caused by the very institutions that now propose to save us from it, and 2) it is the lesser of two evils.

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