Consumer Friendly

We’re bad with names so we forget who at NRO makes this point over and over again.  We’re pretty sure Mark Perry is on this case too.  We’re also late reading The National Review.  In the latest edition, Dan McLaughlin says [third paragraph], “Since 1978 the Republicans have built their economic message around tax cuts and business-friendly regulations …” [emphasis added]

Dan is right about tax cuts but absolutely wrong on the bold part.  The GOP’s message is about consumer or market friendly regulations.  Of course, the GOP is responsible or partially responsible for a number of business-friendly regulations like Dodd-Frank, tariffs, and many restrictions on economic freedom created by the federal government.  Those regulations are business-friendly because they protect existing businesses.  But the GOP message is about economic freedom which means consumer friendly or market friendly regulations like eliminating requirements for opening businesses.  The GOP is not perfect but its message is economic freedom.  That is the opposite of business friendly.

Punctuation

We can’t resist.  We saw a Nancy Pelosi tweet.

Too many Americans are struggling with a rigged economy. Democrats are committed to giving them [hashtag]

We think the correct punctuation moves the period:

Too many Americans are struggling with a rigged economy Democrats are committed to giving them.

Our excuse is that it was fun.  We doubt 2018 will be fun with the old, dismal Democrats versus grumbling GOP.  It is possible the choices in 2018 will be even less inspiring than the presidential ones in 2016.  The good news is that the stakes are lower without a president to elect.

 

A Nice University Story

We are preparing a post on the problems with universities but first here is one about a successful university program.  Competition among universities in each state means that students have choices and programs can have an identity.  The identity of  the University of Wisconsin-La Crosse (UWL) is about state-wide programs.  The identity of the Department of Accountancy is a 150-hour undergraduate program that emphasizes internships at public accounting firms.  Most of the internships are with firms that are not the Big Four.  All of the internships, with the possible exception of some with the federal government, are well paid.  Internships lead to connections with firms that lead to a variety of positive outcomes including scholarships for students.

Here is the story of McKenzie Hofmann, an accountancy major at the UWL:

So, when Hofmann started college, she heeded her mother’s advice and applied for as many scholarships as she could. Now entering her senior year, Hofmann has earned $13,000 total …

Today Hofmann is glad she switched majors and started on the accountancy path. After a full-time internship at a public accounting firm in the Twin Cities, Redpath and Company, spring semester, Hofmann was offered a full-time career with the firm. She’ll start after her December 2017 graduation.

It is a common success story at the accountancy program at UWL: scholarships, internships, and permanent employment.  So McKenzie made $13,000 from (tax free) scholarships and probably more on the internship but that’s taxable.  The program works for students that make it work.

Venezuela And US Taxes

OK, it is a bit of a stretch but there is a comparison between the debacle in Venezuela and reforming US taxes.  It comes from Larry Kudlow’s discussion with Art Laffer and Steve Forbes posted on NRO.  They are talking about how to restore prosperity:

Incentives matter: If you reward an activity, then people do more of it. If you punish an activity, people do less of it.”

But for the tax side of “one big idea,” Laffer would like to see corporate tax reform. I agree. Reagan used to say, “Give me half a loaf now, and I’ll get the other half later.” Well, I’d take the half loaf of corporate tax cuts right now. And that would work for Forbes, who can see income-tax reform following corporate-tax reform. “Even if we get to this two years down the road,” he said, “I think [Trump would] be amenable to doing something radical like a flat tax.”

Socialism and the lack of incentives to produce are part of what is killing Venezuela. The other part is the incentives and abilities socialism gives to those in power.

Incentives are a big problem because the US corporate tax is just about the highest in the world and it is one of the few that is world-wide rather than territorial.

Sidebar One: A more nuanced explanation from the Christian Science Monitor says that most systems are hybrids of territorial and world-wide.  The issue is still the same: Do we (the US) want to tax US corporations that want to invest international funds in the US.  The incentives are really far wrong when we penalize US companies for investing in the US.  End Sidebar One.

Sidebar Two: Most of the problems with writing US tax rules and enforcing them relate to the high US rates.  If the US rates were equal to or lower than most other countries then corporations would not try to use legal and sometimes illegal means to move income out of the US.  The Congress would not need to worry about all the fine print on transfer prices and the like.  The IRS would not need to spend so much time enforcing the fine print.  Lower corporate tax rates are win–win-win.  End Sidebar Two.

We are happy to see Larry, Art, and Steve endorsing changes in the corporate tax system first.  We wish they did it with more conviction.  We wish they would leave out first.  The choices about what to do about Venezuela are complicated and difficult but relate to getting incentives better.  The choices about US tax legislation are easy.  Do corporate taxes by lowering rates and making it easy to invest in the US.  We don’t care if the solution is territorial or hybrid as long as it fixes the problem.  It is the biggest opportunity to improve incentives the most.

E.G., The Hamburger Problem

Kyle Smith discusses the Left’s Hamburger Problem (HP) at NRO.  Kyle explains the phrase, coined by Josh Barro,  and why it is a problem for progressives as follows:

They ladle unto every decision, even the most mundane and trifling one, an unattractive glop of gooey political significance. They can’t resist warning the rest of us that we’re abetting the destruction of the planet every time we, say, tuck into a Quarter Pounder.

It is really worse than that because it means that progressives can’t wander off the reservation.  It is why minority conservatives are always under attack.  While Kyle was writing it a great example came up.  Jamie Dimon, JP Morgan CEO and Democrat, had a public rant about political gridlock.  Steven Hayward at PowerLine quoted it approvingly and asked, Dimon for President?

Naturally, the Left struck back because Dimon had suggested compromise.  At Vanity Fair, Bess Levin said that the Trump-Dimon Love Affair Was Getting Messy and William D Cohan explained: The Real Reason Jamie Dimon Went Berserk About America’s “Stupid Shit”. Jamie said, amongst other things:

I was just in France. I was recently in Argentina. I was in Israel. I was in Ireland. We met with the prime minister of India and China. It’s amazing to me that every single one of those countries understands that practical policies that promote business and growth is good for the average citizens.”

But William concluded that it was about JP Morgan rather than average citizens.  William notes that JP Morgan is doing well lately and that Jamie is doing well.  After trying the envy route, William notes that folks are trying to repeal Dodd-Frank and that this would be good for JP Morgan.  William puts it:

Couple that with an improving economy, higher employment and wages, and the prospect that the Trump administration stands ready, willing, and able to improve the well-being of those who make money from money—by attempting to reduce corporate tax rates, say, or allowing companies a tax holiday on repatriating profits held overseas; and repealing much of the Dodd-Frank financial regulation law that Wall Street has been trying to unwind ever since Barack Obamasigned it into law seven years ago—and it is hard to imagine a more favorable set of circumstances.

Sidebar: Perhaps William is the one with the crush on The Donald.  These do sound like great circumstances that we hope come to pass.  End Sidebar.

Eliminating Dodd-Frank is unlikely to help JP Morgan because Dodd-Frank is bad news for smaller banks and good news for banks like JP Morgan.  A strong economy is likely to be good for JP Morgan but will surely be good for the average citizens.

Next William goes off to complain about the Obama-era low interest rates being favorable to banks.  He says their raw materials are free.  But it also means that lending rates are low.  Bank profits are about the differences between those two rates.  William concludes:

Dimon wants Washington to end its continuous political gridlock and do things that will unleash the American economy to grow faster than the 1 percent to 2 percent annual G.D.P. growth-rate range that it has been stuck in for the past decade, what economist Larry Summers calls “secular stagnation.” Dimon rightly says that higher G.D.P. growth will help the average American, which of course will also help JPMorgan Chase (a fact he conveniently omits).

It doesn’t matter that William doesn’t make any sense.  What matters is that Jamie left the collective and needs to be reined in.  We hope he can continue to be the rarest of creatures, a serious leftist.  Otherwise, the HP will become worse.  It will be bad for Democrats but it will be bad for the country when there is only one choice.

 

The Donald And Jimmy Carter

David French has an article at NRO (motto: we are still Never Trump) trying to blame the lack of success of the Democratic Party during the 80s entirely on Jimmy Carter.  It has the subheadline:

If the present trajectory doesn’t change, Republicans will learn what Democrats learned after their 1980 landslide defeat.

Does this mean that the GOP will learn to nominate unelectable folks?  Certainly, the Democrats were unhappy with Jimmy because he was too far right on domestic policy.  He was a deregulator.  After Carter lost to Reagan then the Democrats nominated Mondale, Dukakis, and Clinton.  David says (and might think):

Democrats, stung by defeat after defeat, kept tacking right in national politics — culminating in a Clinton presidency that in many respects was to the right of both national parties today.

The Democrat actions say the opposite.  They tacked left from Jimmy with all their nominations.  Bill campaigned and initially tried to govern from the left.  Does David remember Hillarycare?  The eruption of 1994 left him a choice: have a couple of years to make appointments or try to shape the times.  He took the latter.

Shame on David for making such a dishonest argument.  We are glad we have The Donald rather than Herself.  We hope the GOP does better in the future but that is up to the GOP.  What we really wish is that the Democrats could do better but that seems extraordinarily unlikely.  We will try to explain why soon.

Math Depends Upon Assumptions

Glenn Reynolds, Instapundit, discusses aging in his USA Today column.  He is in favor of extending lifespans. One of the arguments he gives is:

If we could extend healthspan by 20 years — so that 85 is the new 65 and 90 is the new 70 — people could retire that much later, and those pension obligations would pose a much less pressing problem. [emphasis added]

Agreed.  If folks worked longer and kept roughly the same retirement span then personal, corporate, and governmental finances would brighten considerably.  Unfortunately, that is not what has happened historically.  Here is a chart we used to help students understand the changes in retirement over generations:

Retirement Age versus Life Expectancy

Year Average Male Retirement Age Average Male Life Expectancy Years in Retirement
1950 66.9 65.5 0
1960 65.2 66.8 1.6
1970 64.0 67.0 3.0
1980 63.0 70.1 7.1
1990 62.6 71.8 9.2
2000 62.3 74.1 11.8
2005 61.7 75.2 13.5

We are not positive where this comes from as it was just class information but we think at least part of it comes from Mark Perry at Carpe Diem so a general h/t to him.  Over 55 years the life expectance went up by almost 10 years but the retirement age went DOWN by over five.  It seems unlikely that increasing the life expectancy by 20 will increase the retirement age much if at all.  Increasing our lifespan seems more likely to darken finances, especially public finances.

We would support increasing our useful lifespan too.  You can’t play too much handball.  But increasing our lifespan is more likely to exacerbate the entitlement problem than solve it.  What do you think is the probability of Congress increasing the age for receiving Social Security to 85?