Matt Kibbe and the Beer Freedom Index

 

Wonderful show with special guest Matt Kibbe joining the podcast! Matt is the former President of “FreedomWorks” and current President and Chief Community Organizer of “Free the People“, an economist by training, public policy expert, a best-selling author, and first and foremost craft beer lover!

As a disruptive force in politics, Beer is the perfect microcosm example to discuss problems of top-down central planning and the forces of government planning. Matt, explains the “Beer Freedom Index” (wish I thought of that) and why the less freedom a country has, the less likely it will have a tasty brew…. if at all!

We also dive into the correlations the industry has with technology, the sharing economy, the war on drugs and if we have learned anything from prohibition. Finally, we answer “Is beer the perfect example of liberty in action?”

Be sure to check out “Free The People” and Matt Kibbe on their “Beer Is Freedom” project. Here, Here, and Here.

Follow Matt Kibbe and “Free the People” on Twitter:
@Mkibbe
@FreethePeople

Trump’s Carrier Deal Carries an Establishment Smell

(This article was first featured with Opportunity lives Here)

How do you eliminate $7 million of tax burden on your company? Threaten to leave your state, that’s how.

A Carrier Corp. facility in Vice President-elect Mike Pence’s Indiana just accepted $7 million in tax cuts over the next 10 years to keep 1,000 jobs from moving to Mexico. Debating the details and circumstances of this particular deal seem miniscule compared with the real assessment of how government intervention in this case distorts opportunity and undermines prosperity.

Here are five questions that must be answered before endorsing this deal:

“Whose money is the $7 million anyway?”

For the sake of argument, let’s assume the $7 million is just tax breaks. Often, these deals include other handouts. If this is a break from taxes normally imposed in day-to-day activity, then Carrier would keep its own money — a wonderful thing. It appears, however, that Indiana and federal officials have decided Carrier will receive preferential treatment. Carrier’s competition will continue to bear the standard tax burden, but now must compete against a company with lower overhead costs.

Even people on the right would argue Carrier is taking taxpayer money, but that assumes all of Carrier’s income belonged to the government in the first place. Not so. To say tax breaks steal tax revenues also assumes the corporate or individual income is not their property but borrowed from the government to use. Most Americans thankfully do not accept this idea.

“If Carrier benefits from a tax break, why wouldn’t others?”

This deal opens up an opportunity to ask, “If Carrier gets a tax break, then why not everyone else?” A tax break good enough for one company should be good enough for all companies. If this tax break is the reason for keeping jobs and production within the United States, then lowering corporate taxes across the board should do so the same.

At the moment, the United States has the third-highest corporate tax rate in the world at 38.92 percent. It should be no surprise companies are leaving the country because of an oppressive tax system. High labor costs, brought on by ever-increasing minimum wage laws and unions, compound the problem of doing business in America. The Carrier deal forces the federal government to acknowledge companies cannot create value for their customers and employees without leaving the country’s tax system.

“How large was this deal in reality?”

Although $7 million over 10 years sounds like a lot, that’s only $700,000 a year. By way of comparison, look at the Chiquita Banana deal in 2011. The company received $22 million in local and state “incentives” over 10 years to spur the company to relocate its headquarters to Charlotte, North Carolina. Four years after accepting the deal in 2015, the company announced it would move its headquarters elsewhere after being purchased by a Brazilian company. Local taxpayers are on the hook for millions of dollars with nothing to show.

I can’t predict the future, but somehow $700,000 a year in tax breaks to a $65 billion company doesn’t seem like much when the company already accepted $5.1 million in tax credits in 2011 and was going to spend tens of millions to relocate.

“What are the unintended consequences?”

Keeping production in the United States may mean these employees and resources won’t be invested or deployed more effectively elsewhere. In this case with Carrier, subsidizing an industry that benefits from moving to Mexico has multiple long term and detrimental effects.

Those jobs kept by Carrier in the United States will raise the cost of other products or services. If there is demand elsewhere for employees tied up at Carrier, customers or employers will have to pay higher rates chasing fewer individuals for no additional expected value. These higher rates equate to higher product and service costs, meaning less disposable income for the consumer to spend.

This scenario pushes down employee incomes, increases the cost of products, or requires more subsidies from government for the business to remain solvent. Since there are unions involved and competitors can produce similar or superior products at a lower cost, Carrier likely will need more subsidies or move eventually anyway.

“Is this just the same politics as usual?”

Trump was elected to “drain the swamp,” but promoting the same policies that muddied the waters in D.C. to begin with will only bring about the same odor and grime that created the swamp in the first place.

North Carolina’s Mini-Venezuela Experiment

(This article was first featured on Opportunity Lives HERE)

Last month, Americans demonized the policies of Venezuela that led to empty store shelves and widespread scarcity of the most basic necessities. North Carolina’s recent anti-price gouging laws are causing the same problems with gasoline supplies that Venezuelans are enduring.

I experienced North Carolina’s mini-Venezuelan experiment driving home from work, needle on empty, in need of gas if I was to return to my job the next day. Five gas stations later, all stated prices at $2.15 a gallon, but not one had gas. I could get home, but the next day my 30-mile round trip wasn’t going to happen.

Fact is, a gallon of gas was worth far more than $2.15. I would have paid $5, $10, maybe even $15 for two gallons of gas ensuring my trip to work. Instead, I was faced with an empty tank and dry pumps. Those before me knew of the shortage but had no incentive to change their consumption habits.

The catalyst for North Carolina’s current gas shortage is a leaking pipeline in Alabama that disrupted fuel supplies across the Southeast. Faced with foreseen shortages, regulators protected North Carolinians from high prices — an action that ensured drivers would face those empty pumps.

Thousands of people needed a gallon or two simply to get to work. Many others could be in more dire straits — perhaps an elderly couple needing a few gallons for a hospital visit, or a pregnant woman going into labor, or a single parent who must work to pay her rent.

North Carolina’s gas shortage — or realization of scarcity — wasn’t the result of a leaky pipeline; it was caused by anti-price gouging legislation. Scarcity exists always, for any product in any market. We call this a normal day. Why then, when faced with a broken pipeline, did gas pumps run dry when all commodities are in scarcity?

In freely adjusting markets, prices fluctuate according to supply and demand. In the event of a natural or man-made disaster, supplies of certain goods might drop and demand might skyrocket. But the point is, the market adjusts until some sort of equilibrium is restored.

Earnest politicians often try to circumvent the law of supply and demand by implementing anti-price gouging legislation, which makes increases in prices above an unnamed, arbitrary amount a crime. The thought behind such a law is that those in need will be unable to afford the goods and storeowners would be evil to benefit from a disaster. (Only politicians get to benefit from crisis.)

In reality, anti-price gouging rules are the reason for empty shelves and empty pumps. Price gouging regulations dictate it is better to have no food or gas, rather than access to some food or gas at higher prices.

Raising prices during a crisis ensures those needing gas can get it. Market price adjustments are the most moral path to distributing scarce goods. Yes, gasoline would be inconveniently more expensive, but it would still be available.

Consumer habits would immediately change; individuals would forego less urgent plans or delay unnecessary purchases in response to higher prices. Those who purchased higher-priced gas would do so knowing the benefits far exceeded the cost. This would even work in cases of food and water shortages, as individuals would determine the highest value for scarcity in the market.

And the fact is, storeowners increasing their prices are not necessarily benefiting during shortages. A service station owner needs to make up for lost income during the time he will be without gas, and in the event of a natural disaster he may even need to make up for damage costs.

Higher prices also drive entrepreneurs and companies to adjust distribution. If gas prices were allowed to increase, distributors would have incentive to divert tanker traffic to distressed areas, simply responding to price signals, as opposed to costly and cumbersome government mandates.

Eventually, I found a station with gas at $2.29 per gallon and filled up my whole 16-gallon tank. Passing by over the weekend, that station, too, was out of gas. Luckily the crisis is supposed to be over in the next few days. But the experience should be a lesson in how bad regulations caused our mini-Venezuela.

Some people joked a bit with news from Venezuela’s shortage of beer and toilet paper, but these inconveniences soon escalated to serious problems. Whether the United States distorts markets by enacting socialist policies or whether it is Venezuela, they cause the same problems.

Government, not the free market, causes empty gas pumps and empty shelves.

Craft Beer and the Bible Belt

Jim Tankersley (@jimtankersley), Washington Post Economist joins the show to discuss his recent piece “How the Bible Belt got down with craft beer.” Jim has been around the country looking into craft beer and growth in other industries. Particularly Jim asks the question why the south or more particularly North Carolina, suddenly jumped into the craft beer world! Do we have the right amount, who are brewers competing with, and what opened up North Carolina to the craft world?

Original Article we Discussed
How the Bible Belt got down with Craft Beer

A ‘Freaky-Fast’ Economics Lesson

  • Was a $1 sub worth the wait?
  • What was the Opportunity Cost of your decision?
  • Waiting in line is also an economic decision!

What can last week’s Jimmy John’s $1 sub customer appreciation day teach us about economics?

Plenty.

Of course it’s fairly easy to figure out why Jimmy John’s held such an event: A small investment of subsidizing cheap subs for the return payoff of media coverage, name recognition, and new customer acquisition.

And of course it’s easy to figure out why customers would be attracted to the event. The allure of a free lunch is too tempting for many people out there to pass up, and a $1 sandwich is truly the next best thing! So why not stand in line and get your next-to-free sandwich?

Perhaps a quick crash course in economics, however, may help some avoid the endless lines in the next promotional “giveaway” and decide instead to go across the street and pay full price for something else.

To set the stage; first off there was a line that started 30 min -1 hour before the 11am start time at the downtown Raleigh location. This line soon stretched down the block.

Let’s say you were one of the brave souls to stand in line for the $1 sub. Granted, Jimmy John’s are “freaky fast” at making subs, but transactions are the kink in the freaky armor, for they take time. These transactions consist of debit, credit, cash, and/or coin exchanges.

And let us not overlook the chatty Kathy’s in line who insist on asking the employees “Busy enough for ya!?”-My stomach turns just thinking of these people.

At this point in my scenario, the original line waiting for the doors to open that was down the block is even longer, and people continue to join in.

With the reality of this painfully long line, it will probably take 30 minutes to an hour at best for someone to get into the shop and place an order.

Finally, you get your sub – and it only cost one dollar! Was it worth it?

Helping us answer this question is the concept that Frederic Bastiat referred to as the “seen vs. the unseen,” and the main ‘lesson’ from Henry Hazlitt’s book “Economics in One Lesson”: opportunity costs.

We can easily see the $1 sub that you enjoy for lunch; but what else did that sub cost you? In this case, what else could you have done with that 30 minutes or even an hour of your life you spent waiting in line for the sandwich? Perhaps extra work at your job, exercising or a more leisurely dining experience elsewhere. The highest ranking alternative you didn’t select is known as your opportunity cost. This is the “unseen” cost of your action – or the opportunity you chose to forego in order to wait in the long line.

It should be mentioned that the Jimmy John’s sub included in the $1 deal would normally cost $4.75, so you are foregoing these other activities to save $3.75.  By choosing to wait in line, you are revealing your preference to save $3.75 on a sub over the next-best alternative.

By extension, this lesson in opportunity costs is especially relevant when looking at the functions of government. Every dollar the government spends is first taxed or borrowed from the private sector. Sure, we can easily see the new bridge or highway the government builds. But what about the ‘unseen’ opportunity costs? What could that money have been used for if actors in the private sector had instead been allowed to spend it themselves?

Society may be one bridge or highway richer, but it is also deprived of something else that may have higher value. And given that government spending is political and not market-driven, it is more likely that private sector projects do a better job of meeting the most highly valued needs of society.

For these $1 sandwich customers, they may end up regretting their decision to exchange $3.75 for 30 min of time. Even if it was a bad choice, the decision only effected one person as opposed to effecting millions when the government poorly appropriates other people’s money to the least valuable choice.

So next time you hear of the mass ‘pandalerium’ of a next to free meal, think about what it will cost you in terms of the ‘unseen’ opportunity costs. Maybe eating across the street at a new restaurant watching the fools in line will be more enjoyable and more worthy of your hard-earned money and time.