>What Do Oranges, Furnaces, and Your IRA Have in Common?

>On Friday, an average American spent the entire day with the federal government without ever leaving his home. No, there was no knock on his door by some plain-clothes Gestapo. Neither was he treated to one of those infamous “no-knock raids” where a small army of thugs with various acronyms spelled out on their backs burst into the homes of the innocent and terrorize whomever happens to cross their paths. Nothing so dramatic happened that day. However, the long arm of the federal government made itself equally palpable nonetheless.

The first thing that he tried to do that day seemed innocuous enough. Being a native of Western New York and now living in Florida, he attempted to schedule a pick-up to ship some freshly-picked Florida oranges to a friend back home. He had purchased the oranges from a local orchard a day earlier, putting aside about two dozen for his friend in the wintry north. Anyone who has eaten oranges fresh from the tree here in Florida can tell you what a difference there is in freshness and taste from those purchased in grocery stores in the north when they are several days or weeks older. There is also a significant difference in price, especially this time of year. Oranges in Florida cost about $.40 per orange, while those same oranges cost about $1.50 each when purchased in Western New York.

For all of these reasons, our average American decided to do something nice and send a couple of dozen freshly picked oranges up north. That’s when he had his first encounter with the federal government. It turns out that what he was attempting to do was extremely dangerous and therefore prohibited by USDA regulations.  According to the USDA website,

Under current federal regulations, all shipments of fresh citrus are prohibited from leaving Florida unless they meet certain requirements, including:

• Inspection of the grove within 30 days of harvest;

• Treatment of the fresh fruit with a special decontaminant;

• Issuance of a federal limited permit that must accompany the fruit. The limited permit confirms that the inspection and treatment have been carried out; and

• Clear marking on the packages to indicate the fruit is prohibited from being delivered to other citrus-producing states.

The reason given for these regulations is that they are “designed to prevent the spread of citrus canker to other citrus-producing states while preserving Florida’s fresh fruit citrus market.” Surely the reader is familiar with citrus canker – that pandemic scourge that rivals swine flu in its danger to all of humanity if not for the federal government and its regulations.

There are a few consequences of this legislation that the government would have us believe are purely coincidental. The first is that the federal government is now authorized to collect a tax, which is all the fee for the “limited license” really is. The second is that citrus growers are effectively insulated by law from any out-of-state competition. Ironically, the federal government supposedly derives its authority to impose such a regulation from the commerce clause of the Constitution – which was written to prevent protectionism by the states!

The effect of these regulations is that consumers everywhere – in citrus producing and non-citrus producing states – pay higher prices for oranges. For those states without citrus growers, the licensing costs and higher costs due to limited shipping options are passed on to consumers. This is what explains Western New Yorkers paying $1.50 per orange. Even in citrus producing states, consumers pay a higher price than they otherwise would if their in-state growers had to compete with out-of-state growers freely shipping their products into the market. Of course, the government and its “progressive” supporters would have us believe that these are merely necessary costs of public safety. It couldn’t be that large, corporate citrus producers had anything to do with lobbying for and perhaps even writing these regulations, could it? Surely, the additional profits and insulation from competition are purely coincidental, aren’t they?

Having resigned himself that he could not ship the oranges himself without the federal license, which was not cost-effective for two dozen oranges, our subject acquiesced to send the oranges directly from an orchard licensed to ship out of state (at a premium price) and moved on to his next order of business. He needed a furnace for one of his rental properties. Being a small businessman who owned or managed approximately 100 properties, it was his responsibility to repair or replace any home appliances that ceased functioning. As a furnace is a significant cost for a small business, he consulted a well-known internet resource to see if he could get a deal on purchase and installation. He found several vendors advertising low-cost installations for home furnaces.

The cost of the home furnace that he selected was about $800. The cost to have a licensed HVAC contractor install the appliance was approximately $1,700 (remember this is New York), for a grand total of $2,500. The vendor on the internet worked for one of the established HVAC contractors that sell and install these appliances. He was offering to sell the furnace at the advertised price of $800 and install it for $300. This represented a savings of $1,400 – significant for a small property management company. When the small businessman offered to accept the offer and pay by credit card, the internet vendor educated him on what was going on. The transaction would have to be executed in cash, because it would be in violation of federal regulations. Not wishing to run afoul of the law, the small businessman declined and acquiesced to pay the $2,500.

It should be remembered that the vendor was not offering to sell stolen goods. He was selling the actual furnace at the same price that the HVAC contractor was selling it at. The internet vendor was merely offering to do the installation labor at what amounted to a real market cost of about $300. Why can the HVAC contractor charge $1,700 to send the exact same technician to install the exact same furnace? Only because it belongs to a cartel that is created by federal regulation and licensing requirements. Again, the reason given is public safety. We can’t have just anyone installing HVAC equipment or we would all be blown up within a week. It couldn’t be that large, corporate manufacturers and HVAC contractors associations lobby the government to pass these competition-stifling regulations, could it?

What did our average American businessman do next to garner the attention of the federal government? Nothing. Frustrated and having spent an inordinate amount of time on two seemingly simple activities, he decided to call it a day. However, the fact that he was sitting in his home doing nothing does not necessarily mean that he was free from federal intrusion. While reading some personal e-mails, one popped into his inbox from his financial advisor. It concerned his IRA.

A few years earlier, he had decided to take a portion of his retirement savings out of his traditional 401K and put it into an IRA with a company that specialized in foreign stocks. His strategy was to protect his savings from the ongoing depreciation of the U.S. dollar and the structural weakness of the U.S. economy in general, which was and is based almost purely on consumption and borrowing. The firm with which he opened his account invested his retirement money in foreign companies with strong balance sheets that were paying dividends. Overall, the investment strategy was sound and relatively conservative. In any case, it was his money to do with as he saw fit. Or so he thought.

It seems that since “the crisis,” the federal government had taken an interest in him in this respect as well – as always for his “protection.” His broker informed him that a “Client Profile” that he had been required by federal law to fill out upon opening his account had to be filled out again. However, since the company that he opened the IRA with specialized in foreign stocks, he now had to mark “Speculation” on his risk profile. The company had to have this signed affidavit on file in order to legally continue to manage his account. This was all designed to protect him from unscrupulous fund managers who might buy foreign stocks with his retirement money without telling him how risky said foreign investments might be.

Absurdity abounds in this regulation. The stocks in our subject’s portfolio all had strong balance sheets (modest debt-to-equity ratios) and were paying dividends. To invest in these, according to our government, is “speculation.” However, to invest in U.S. Treasury bonds – the bonds of an enterprise that is currently losing $1.6 trillion per year, has over $12 trillion in debt, and over $60 trillion in unfunded liabilities – would qualify as “low risk.” However, there is more to this story than pure government incompetence.

Consider the effects of a regulation such as this. There is some percentage of people who wisely got out of U.S. stocks and U.S. dollar-denominated assets in general over the past several years. However, after the misinformed propaganda campaign by our government against speculators as the cause of the recent financial and economic crises, there are a number of reasons that those people might not want to be labeled as “speculators” themselves. They might erroneously perceive speculation as unpatriotic or even evil, given what they have heard. The less gullible might fear more onerous federal actions against them once they are officially identified as speculators. In any case, this regulation is going to cause some people to close their accounts with companies that deal in foreign stocks or at least shift their assets back to U.S. stocks.

This is going to have the effect of raising the price of those U.S. stocks that these “speculators” decide to buy. That price increase does not represent real market forces at work, because without the regulation, the investors would have left their money in the foreign companies. Again, this is supposedly the unintended consequence of a regulation that is nevertheless necessary to protect the public. Who just happens to benefit? As usual, it is the large corporations whose stock prices will appreciate and who also just happen to fund the campaigns of the people who passed the regulation in the first place. Doesn’t anyone see a pattern here?

None of these regulations actually benefit the public. The citrus and furnace consumers pay exorbitantly higher prices and are certainly no safer from danger because the corporate cartel member filled out a government form and paid a licensing fee. How many people have to die from FDA-approved drugs (or from the unavailability of unapproved drugs) before this is sufficiently clear to average Americans? In the case of the foreign stock investor, he is actually harmed by the regulation if as a result of it he takes his money out of safe, foreign investments in viable companies and puts it into shaky U.S. corporations or soon-to-be-downgraded U.S. Treasury debt.

Progressives supposedly support these regulations in order to protect average Americans from the large corporations that they vilify at every opportunity. As we have seen ever since their hero, FDR, instituted this fascist regulatory structure in the 1930’s, they achieve exactly the opposite result. With each new set of regulations, large corporations grow richer, more influential, and more insulated from competition – all at the expense of the “little guy” that the regulations supposedly protect. To quote another progressive hero from the 1960’s, “When will they ever learn?”

11 thoughts on “>What Do Oranges, Furnaces, and Your IRA Have in Common?

  1. Claire M

    >Yes. it drives me crazy how the commerce clause is misused. Take health insurance companies, for example. If I live in California, why on earth shouldn't I be able to buy a policy from an insurance company in Tenessee, if that is the one that best suits my needs and my budget? The commerce clause was intended expressly to PREVENT states from restricting inter-state commerce through regulations or tariffs. Now it is used to justify exactly the opposite. The irony in this whole health care reform debate is that it is largely due to the perversion of the commerce clause and other violations of the Constitution that health care is so expensive– and yet the current administration considers the solution to be yet MORE such violations… Obama keeps saying that he will consider any good suggestion from "the other side" for making health care more affordable… Okay, how about lifting regulations on practitioners and drug manufacturers; how about letting people decide for themselves without the help of "big brother" what, if any, health insurance policies they buy? If true free market competition were allowed for health care, it wouldn't be the end of the world not to be insured, because treatments for al kinds of conditions would be so much more affordable. In fact, it is the ubiquity of health insurance that drives up prices, because when you have a third party paying for your drugs and visits to the doctor you don't need to shop around for the best price, and they can jack up prices all they want– but that's a different topic…

  2. Crusty

    >If government doesn't protect you, who will? Just because you don't understand the need for the government protectional regulations, doesn't mean they don't exist for a good reason.

  3. Julia C Taylor

    >I don't want an unqualified person to install my furnace. It really could be deadly or reduce the value of an expensive asset: my home or business. At the very least, it could waste money in higher heating costs due to lowered efficiency.

  4. Tom Mullen

    >@ Julia – You are perfectly within your rights to establish that standard. However, there are three things that I do not believe that you are considering if I understand the intent of your reply (that the regulations are proper)

    1. The regulations don't necessarily quarantee that the person who installs your heater is qualified or that you have a lower risk of accident or other negative result

    2. Neither you nor the government has the right to decide for me how qualified the person must be to install my heater. I may decide that some of the standards set by the regulations are too high, some are too low, or that I don't care what qualifications the person installing has. It is my risk to take with my own life and property, and my responsibility to deal with the consequences if I make bad choices.

    3. Since the intent of these regulations are not really your safety or mine, but rather the ill-gotten profits of politically-connected special interest groups, some method of ensuring quality through voluntary means (rather than forcefully through government) will have better results and will not trample upon the rights of those who are harmed by the regulations

  5. Anonymous

    >Install a furnace for $300? Wow what a joke. Good luck with that. Enjoy the lawsuit after the occupants die of CO poisoning from a crappy install. Tom you are an idiot.

  6. Crusty

    >That's a good point, Anonymous. I don't know how anyone could trust a $300 install, especially if it's not certified by the government. The only thing worse than that is to trust something that you've installed yourself.

    The only way you can be assured that nobody is going to die of CO poisoning is to pay a government certified installer a lot more money than necessary to install it for you. If there's one thing we can all trust in this world, it's the government, and their certified agents. Finally someone's talking some sense on this blog. Thank you for being so aware.

  7. Tom Mullen


    Please explain how the $300 install has a higher risk to the occupants, since the SAME technician would be installing the SAME furnace. Did you read that part of the article carefully?

  8. Crusty


    Tell Tom why he's an idiot…put him in his place for both of us. Tell him why the installer who is government certified but offers to do the job under-the-table for $300 is going to kill him with CO poisoning. Don't back down…prove to him that he's an idiot.

  9. Anonymous

    >A certain Austrian economist concludes there is no such acting entity as "government." What we call government is, rather, individuals acting in a governing manner.

    The belief that these individuals in government act to protect us is dearly held by many. I will agree that plenty of persons acting in the governing way believe and desire to protect us – who pay them by the way. Yet by and large the people in the government act to protect themselves and their bosses. It is further inherent in the nature of bureaucracy to encourage this.

    We live in a time when the working of these individuals for themselves and their bosses rather than for us who are the supposed beneficiaries of their actions is particularly visible. The banking bailouts show it.

    I wish to bring up another example of the protection fallacy which is similar to Tom's examples. It's an old one but when I search on the web I don't see my perspective on it being mentioned.

    If everyone in my car doesn't wear a seatbelt then I and they can receive a stiff punishment.

    Yet where I live, if I ride in busses, vans and limo's – whether private or government (subsidized) busses and vans – then the seat belt isn't required and often is not even available.


    My hypothesis: the commercial insurance of these other forms of transport by vehicle covers the drivers and passengers. Whether there is a lower crash rate for commercial drivers and/or vehicles doesn't affect this argument. It's an insurance issue nonetheless. Besides, if even one person gets hurt, then a person gets hurt.

    My conclusion: the insurance companies pressured or offered benefits to individuals in the federal, state and many foreign governments to force people to wear seat belts.

    I no longer believe those in the government originally mandated this to protect me or my neighbors but rather to protect and benefit themselves and their bosses.

    Some may say, "big deal," but to me it is because I don't like these lies.


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