For no particular reason, I just haven’t felt compelled to write in spite of finding a bunch of really interesting nuggets in the daily news. I think my writers block is passing… today’s post is a compilation of the small items that have caught my attention this last week.
California Eggs, Consumer Protections and Special Interest Groups
An egg fight has broken out in California over what else, the egg business. Last year the Humane Society sponsored a ballot initiative effectively requiring all egg producers to go cage free… it wasn’t written that way but that is by their own admission what they are targeting.
The ballot initiative was poorly written from a compliance standpoint, deliberately it would appear, and now the egg producers (a $300 million a year business in CA) are crying fowl (pun intended and yes I did misspell “foul”) because they are not getting any guidance about what they need to do in order to comply.
My first reaction is that it’s pretty shitty that the Humane Society, a group with a noble purpose and point in fact is a special interest group, could push through a feel good measure that saddles a food industry with yet more costs that get passed on to consumers. I wondered what would happen if CA egg producers said “fuck it, we’re leaving” knowing full well that the out-of-state producer mandates are difficult to enforce, or how would voters feel if eggs were suddenly 50 or 100% more as a consequence of increased costs being passed on across all producers. What would the state do if egg producers boycotted the state?
However, as the above is unlikely to happen, what does present itself is an interesting opportunity for CA egg producers to focus on the high end of the market, in effect dominating national (international?) supply for cage free eggs and leaving the low end of the market for out of state producers that fall below the threshold required to trigger the cage free mandate. Bet that isn’t what the Humane Society had in mind but an example of the law of unintended consequences that stems from interest group sponsored legislation.
RIAA Scores a Big Victory in a Civil Verdict
Ars Technica did a bang up job covering the retrial of Jammie Thomas-Rasset for illegal downloading of songs. I won’t get into my particular opinion on the bigger issue of the RIAA pursuit of downloaders, but this trial was interesting on several levels.
First a little background, Jammie Thomas-Rasset was convicted in an earlier trial for illegally downloading 24 songs and assessed a penalty of $220k. Her legal team persuaded the federal judge that the penalty was excessive, among other factors, and a retrial was ordered. The retrial concluded this week and a new penalty of $1.9 million was levied… to the shock and dismay of her legal team.
It appears rather conclusive that the defendant did violate the law and despised as they are for going after downloaders, the RIAA does have a right to pursue legal remedies against downloaders. Whether or not they SHOULD is a different discussion and not particularly relevant to why I am writing about this case.
Thomas-Rasset proved herself to be a nightmare for her defense team, not only from an attitude standpoint but also having implicated herself on the stand in several outright lies. This serves to reinforce what any first year law student knows, a defendant has to be sympathetic for the jury to find favorably for them, in this case it appears rather clear that the jury found Thomas-Rasset rather dislikable and skewed their damage award accordingly. I’m not saying this is right or wrong, it just is what it is.
CA’s Treasurer Pissed at Ratings Agencies
California Treasurer Bill Lockyer is pretty upset with bond ratings agencies, in response to a threatened multi-notch downgrade of California, Lockyer’s spokesperson said the ratings “don’t mean squat”. He may be right.
I have always found it curious that municipal agencies are required to buy insurance on their bond offerings, the cost of which is passed on to taxpayers, when municipal defaults are so rare. There was a time when the complexity of information about state finances, as well as the opacity of it, meant that ratings agencies actually performed a service… but can anyone really say that the ratings analysts know something about California’s finances that well informed investors don’t already know?
As much as it would be a mistake for states to be allowed to effectively self-rate, I’m wondering to what purpose to ratings agencies serve in this day and age, and to a lesser degree what the bond insurers role is. Indeed it would be catastrophic for the bond insurers to have to cover as much as $100 billion in defaults by California alone, they could cover the default but the industry would never be the same again and because every state would see bond insurance skyrocket as a result of a CA default, the Federal government would surely step in with yet another bailout.
So while Lockyer is probably right to say the ratings “don’t mean squat” that doesn’t change the fact that CA is insolvent and the bond markets know it. He has proposed new approaches to ratings in the past but when his only allies are states in equally dire financial condition, well he is likely to suffer the fate of a petulant child being punished for misbehaving, which is to be ignored.
Welcome To California, Highest Taxes in the Nation
While I am on the subject of CA, it’s again worth pointing out that we feature a tax system that has few limits on the small percentage of taxpayers to fund personal income tax payments to the state, yet still have a $24 billion hole in our budget. Anyone who suggests that higher taxes are the solution for CA really should not be taken seriously.
We can argue all day about this loophole or that (unless you are talking about lower economic tiers where “loopholes” are more commonly referred to as “tax incentives” and wealth redistribution schemes are called “subsidies”) but the fact that a small percentage of taxpayers supports the state income tax receipts disproportionately is just that, FACT. 15% of taxpayers pay 83% of the personal tax receipts that the state collects… more taxes are not the answer, a fair tax system is.