Sunday, August 14, 2005

Other People’s Property (OPP)

I don’t like the idea of someone else deciding what’s the best use for my property, whether it is my land, money, house or any other type of capital. The funny thing is that politicians don’t like the idea either, when it comes to their own stuff. When it comes to somebody else’s belongings, they don’t hesitate to legislate other people’s property to purposes not intended by the owners.

The ASG use of the Employees Retirement Fund is an obvious example of such abuse. If our government officials were so concerned about saving LBJ, why don’t they loan the semiautonomous entity money from their own personal savings accounts instead of using the people’s money over and over again. Especially since the LBJ Board of Directors testified to the senate that it cannot guarantee repayment of the $10 million loan.

As flagrant as the ASG may be with the retirement fund, what is less obvious is how Rep. Afalava’s price-gouging legislation will be particularly destructive to our property rights and economy. The first principle the people must realize is that government infringement usually starts small. First, they’ll regulate prices during emergencies, and then they’ll eventually find some excuse to regulate prices at their whim. This is just the beginning of price regulation.

Even though the ASG only wants to impose price restrictions during the time of an emergency now, price-gouging legislation will have a negative impact on our economy anyway. First, can you imagine the costs involved with all the frivolous lawsuits that price-gouging legislation would encourage? It likely that businesses would be seen as guilty until proven innocent, having to demonstrate that their prices are “attributable to additional costs incurred in connection with the rental or sale of the commodity” during an emergency. Businesses may end up spending millions of dollars in time and money defending themselves. It’s likely that businesses would opt to settle out of court or plead guilty to avoid such expenses. Is this justice? Would potential investors want to open shop in our territory knowing that such a situation can exist?

The ASG should also consider the costs to our courts to hear future cases resulting from this price-controlling measure. Do I hear higher taxes in the near future?

What is also seemingly lost to the Fono and the governor’s administration is the fact that consumers are not the only ones to experience rising costs. Businesses also face rising costs in an emergency, paying higher gas prices and materials to prepare for the pending storm like everybody else. In order to stay open for business, costs have to be passed on to the customer.

The ASG simply has no legitimate reason for price-gouging control. Here are some facts for legislators to consider: 1) Profit maximization is reached where marginal cost equal marginal revenue. 2) The lower the costs of the product, the more units of the product one can supply. 3) The lower the price, the more people buy. With these three facts in mind, if suppliers can lower their costs, they would lower their price to sell more products to increase their profits. Do you think computer manufacturers lowered their prices because they had such a big caring heart for society? No. They lowered their prices to increase profits.

Higher prices are a result from higher costs whether legislators want to hear the tune of that song or not. It is the profit-seeking initiative that entices suppliers to lower, not raise, prices. Any economist out there willing to refute that?

In the run-up to a pending emergency, if this price-gouging bill were law, people would buy more than they need. Once the disaster hits, stores would be confined by price regulation, but those who bought more than they needed will not be. Black market, anyone? Price-gouging legislation will exacerbate shortages typical of any emergency, hinder the private sector's ability to react efficiently and create a black market.

To what length are we willing to persecute our own people to enforce the ramifications of this price-gouging measure? If the ASG has no faith in the free market, in freedom, then it should come clean with people and just say so.

Monday, August 08, 2005

Unconvincing Arguments For Tax Increase

Samoa News reported, “Companies that produce water locally came out strongly in support of a legislation adding ten-cents excise tax on bottled water.” They were not alone in voicing support for the bill. Rep. Paopaoailua Joe Fiaui desires to vote for the measure ASAP, and Rep. Muavaefa’atasi Ae Ae Jr. believes bottled water from foreign countries to be part of some conspiracy to “kill us all, leaving the Koreans and other people alive here.”

Rep. Muavaefa’atasi’s statement was not the only ridiculous argument given in support of the tax increase.

Local companies demand that the public pay higher taxes for bottled water so that their businesses can stay afloat. Island Choice says that we should care about their enterprise because they employ local people. However, a customer of Island Choice’s products isn’t always an employee of the company. So what is Island Choice’s justification for non-employee consumers of their bottled water? Are they going to let the rest of us share in their profits?

I don’t recall local water companies or their employees promising to share the money they make with the rest of society. And I don’t expect them to. Businesses are in it for themselves, as it should be. That is why it is simply morally wrong for entrepreneurs to demand relief at the expense of consumers and taxpayers when things don’t go so well, because in times of milk and honey, they get to keep all the profits for themselves.

That is why after this tax increase, people will call for price controls. A clear sign that the ASG would ultimately regulate local water companies is Sam Kapu’s suggestion that “companies would raise prices however they want to” in absence of a price control board. In addition, Governor Togiola submitted a price-gouging bill last week that would legalize price-controlling measures. If local water companies want to become semi-autonomous institutions like ASPA and LBJ, then they should continue their support for the tax increase. And some companies may want that seeing how public funds will pay their bills.

If there is any conspiracy to be believed, it is that the ASG is posturing itself as a Soviet-styled command and control center of our economy.

Supporters of the tax increase also say we should be ashamed of the low wages foreign bottled companies pay their employees. But have they ever thought about what other alternatives those foreign workers would have if it wasn’t for these foreign companies. Those workers may end up as prostitutes or drug dealers if it wasn’t for their “low-paying” jobs, or they may very well starve to death. If we’re so concerned about poor people starving in countries like Africa, for example, then local companies in American Samoa shouldn’t be trying to undercut their sources of income by blocking free trade.

Rep. Muavaefa’atasi says, “Is [foreign imported water] safe for us?” Here’s a thought for the representative: If a court convicts any company of hazardous products, that will be the end of the company. Would anyone keep going to McDonalds if they were convicted of mishandling their food, which resulted in a dozen deaths? No. Businesses, as well as foreign ones, have the incentive of making more money to keep their products and services as safe as possible. Government, which regulates itself, doesn’t have a similar incentive other than elections every two or four years.

Rep. Paopaoailua says, “Hell, I don't need Fiji water. I support this bill and I'm ready to vote for it.” But why should his preferences be imposed on the rest of us? Aren’t we all free people to decide for ourselves the kind of bottled water we drink? His statement clearly shows that the House definitely doesn’t see itself as the “chamber of kids” as Senators have labeled them. Perhaps it would be more appropriate to call them the “chamber of tyrants.”