Less Voter Fraud in Wisconsin

It is a small victory over the cheaters but now the Wisconsin Supreme Court has upheld the Wisconsin law to require voter ID.  It is hard to imagine that this is controversial but it appears that one side of the political debate felt that they get more illegal votes than the other side.  Once one side comes to such a conclusion then it is time to fix bayonets for the partisans.  This, hopefully, final approval means that Wisconsin moves closer to India in establishing requirements to vote.

India may not be the perfect choice to emulate on voter rights.  On the other hand, it has about 1.25 billion citizens and a billion voters and over a third of the citizens earn below $1.25 a day.  After you are sure that you noticed that the poverty statistic was earnings per day, you can compare it to the poverty line of almost $24,000 for a family of four in the US.  That is 52 times higher and the Wisconsin poverty rate is much lower at 13.2%.  If a large, multi-cultural, and relatively poor country can protect voters rights then states in the US ought to be able to do it too.

Freedom improved in Wisconsin today.  Few laws are perfect and we doubt that this is the exception but it is an improvement.

Cruel and Unusual Punishment

Catherine Rampell has a column about terrible events in New York City.  Although she reports it as a good thing here is what happened:

The Big Apple, you see, is joining a handful of other trailblazing cities such as Washington, San Francisco and Newark in guaranteeing workers what Congress has not: mandatory sick days. Wednesday was the first day that the newly covered workers could use the sick leave hours they have legally accrued.

In short, the government is making it more expensive to employe folks.  It is another way to make life more difficult for lightly skilled folks.  As we know, folks need to develop their resumes to reach financial success.  MWG often complains about Congress but here is an example of Congressional wisdom – at least when compared to New York City.  NYC is working to keep the taxi monopoly and keep poor people out of work.

More Outsourcing

Tom Still has an interesting half-article on what we discussed yesterday.  He makes the important point that:

Outsourcing has become an issue in the governor’s race because Republican Walker has gone after Democrat Burke over the supposed outsourcing of jobs by Trek, the Waterloo-based bicycle manufacturer. Founded by Burke’s father, Richard, and now led by her brother, John, Trek employs about 1,000 people in Wisconsin and another 800 abroad. It cranks out high-quality bikes in Wisconsin as well as Germany, Holland and China – precisely because Trek wants to be close to those markets, too.

Well, labor prices in China might have something to do with the decision but yes, economic freedom is a good thing with good results.  Unfortunately as Heineman but not Still mentions, “The debate heated up in political years (including 2012), when “outsourcing” became an especially a dirty word.” Now Heineman is is arguing that it should no longer be a dirty word and we agree with him on both counts.  Still is only arguing that outsourcing is OK.  So we all support economic freedom like outsourcing.

Why, you ask, does Still only have half an article?  He says:

The increasingly curious exchange between incumbent Gov. Scott Walker and challenger Mary Burke over the “outsourcing” of jobs illustrates how political campaigns and economic realities seldom mesh.

True, but he doesn’t get to the interesting part of it.  The interesting part is that the party of economic freedom, led by Walker, is complaining about the use of economic freedom by Trek while the party of centralization, led by Burke, cannot admit that Trek effectively used economic freedom to become more successful.  If Burke used Still’s article as a rejoinder it would be a great step forward but the opportunity was missed.  

Mary Burke and Outsourcing

Wisconsin governor Scott Walker and challenger Mary Burke are having a dustup about the outsourcing by Trek Bicycle, Burke’s family business.  As Jim Geraghty reports she was asked about “rumors in the media about you and Chinese employees and the minimum wage — is there any truth to that, or any story behind that?”

Here’s Burke’s answer, in its entirety: “I’d be happy to address that. Trek is the largest manufacturer of bicycles in the United States. Trek employs early 1,000 people in Wisconsin. In addition to $50 million in payroll in Wisconsin, by supporting millions of dollars in goods and services from all other Wisconsin businesses, small businesses across the state, its impact on the Wisconsin economy is incredible. so Trek is very proud to be a great Wisconsin employer, a great contributor to Wisconsin, it was founded nearly 40 years ago right there in Wisconsin, and it has grown to be a global company with its headquarters in Wisconsin.”

Her answer is a tidy evasion of the question and tells you the answer indirectly that indeed Trek is outsourcing to China at low wages.  This presents a dilemma with political and economic dimensions for conservatives.  The economics are easy: outsourcing is good.  Even when outsourcing is caused by punitive tax laws it is good because it identifies the problem.  As conservatives we want to be on the side of growth that outsourcing leads to.  

The politics are different from the economics.  Burke’s platform includes raising the minimum wage.  She is a progressive who wants to insert government into business in all sorts of circumstances but has prospered and supported the freedom of Trek to outsource.

Sidebar: supported?  How do you respond to the fact that she is not in operational control of Trek?  She is on the board of directors of a private company.  She has influence in Trek.  The other choice is that her claim to fame as successful in business is false.  End Sidebar

The connection of Burke to outsourcing does highlight the inconsistency of her behavior.  Victor Davis Hanson has illustrated how cutthroat capitalist can still be politically correct.  None of the people that Hanson describes, however, are running for office.  The connection of Trek and outsourcing could be very effective in what is predicted to be a close race.

Let’s assume it is and Scott Walker is re-elected because of it.  The question is: is one successful campaign worth this tactic?  MWG says no.  People will not remember that the campaign was about Burke’s special circumstances of economic freedom for her but not for everyone else.  They will remember that a Republican said outsourcing is bad and our collective economic IQ will fall again.  The cat is out of the bag and looking for somebody to bite in 2016.

Begin Again – Irony

MWG took Lady de Gloves to see Begin Again.  It is a poor man’s Lost In Translation with great performances and an a different plot.   It is not as good but other than Sherlock, what is?  

Sidebar: We are with the Emmy nominations because Sherlock is the best movie in years.  

End sidebar

Begin Again is an excellent show because it looks like Dan (Mark Ruffalo) is going to going to circle the drain in movie pathetic that we have seen a hundred times (and avoided hundreds more).  Instead, he decides to become an interesting character with an interesting relationship with Gretta (Kiera Knightly), the singer-songwriter he discovers, and his estranged family.

You should see it and pay attention for the irony at the end.  Gretta decides to become a capitalist by publishing her own record on the Internet.  Then, and I can’t find an exact quote, she makes some disparaging comment about capitalists.  Does the movie intend this as irony?  Does it tell us something about Gretta and Dan’s future together?  MWG is not in agreement with the Wikipedia summary of Dan and Gretta.

 

Juxtaposition of Events

This summer Men With Gloves has observed the repeal of the Aussie carbon tax and the banning of fracking in Germany.  These two events seem to make the opposite of sense.  Carbon taxes are thought of as relatively benign environmentalism.  Lots of folks like Greg Mankiw are supporters.  MWG could be another under the right conditions.  Carbon taxes are thought to be benign because they increase the cost of carbon causing other sources of energy to be more competitive.  One problem, as Australia demonstrates, is that to get the tax passed there have to be lots of deals because the tax is going to be regressive.  It is the practical accounting problems in passing the bill rather than the theoretical economics.  For the tax to gain friends it also must gain enemies.  When the actual tax is put into practice on citizens, many will recognize a negative impact.  The losers ban together to eliminate the tax.

The banning of fracking in Germany is an entirely different matter.  Banning fracking is an example non-benign environmentalism.  It is a win for the coal industry and Russia.  One of the pro-ban groups shows an image from the movie Gasland.  Now there is a reliable and unbiased source.  MWG thinks that Mr. Putin should focus their minds on solving this problem but he was not sufficient to overcome human biases.  The problem is that humans have a hard time recognizing that the loss from the carbon tax is just like the loss from banning fracking.  

Human behavior is hard to model.  We can understand how fracking can be banned and a carbon tax can be rejected but it stresses any model.  The juxtaposition of these two events isn’t as odd as it first seems but it is a challenge.

Biden Conundrum

MWG’s flippant reaction to the impeachment of the current president has always been: do you want Biden as president? Seriously it is up to the Democrats. When they are ready to go then go. Otherwise there are things to get done.
The flippant reaction leads to the Biden Conundrum. The unstated premise is that Biden would be a lower quality President than the current one. Yet the first act of the new President would be to nominate a new Vice-President. The conundrum is that Biden has to nominate somebody better than Biden to be his replacement. That would put Biden ahead of the current occupant.

Entirely Rubbish

The links don’t work so you are on your own.
The free speech part of Robert Reich’s screed on Walgreens has been by The Best of the Web Today. We want to look at the incentives and congratulate Walgreens on doing the right thing.
As Reich points out the US has highest official tax rate in the OECD. The US also the only G-7 country that doesn’t have a territorial tax system. This leads to the “tax dodge” of US corporations not bringing earnings into the country.
Sidebar: What is a tax dodge? There is no official definition of the term but it seems to mean a legitimate method of reducing taxes that is not available to the writer.
End Sidebar
So the US has a corporate tax system with terrible incentives. The lack of a territorial system keeps investment out of the US. High tax rates leads to a variety of problems including a great deal of lobbying to reduce taxes for some subset of corporations. As Reich points out, the US also has extensive regulations like Dodd-Frank that lead to additional lobbying.
Reich confuses average tax rates for a category with tax rates for an individual instance. Some corporations pay no corporate income tax and some pay lots because of all special provisions in the tax code. Reich cites a report that Walgreens will save $4 billion over five years. If the report is true then Walgreens is paying lots of taxes. A quick look at their financial statements suggest a rate of 36% after adjusting for deferred taxes.
Another confusion is

The tax dodge [#2 becoming Swiss] likewise means more money for Walgreen’s investors and top executives. Which is why its large investors – including Goldman Sachs — have been pushing for it.

So why are the small investors and the consumers pushing for this too? Do we think that it is a good idea for Walgreens to pay excess taxes? Let’s go shop at Walgreens because they are acting rationally.
Perhaps we should think about improving the tax code too. Let’s start with the corporate tax rate because there is an optimal tax rate. Zero.

Rules versus Principles

Accountants have been debating rules versus principles for years.  See the WSJ [2002] for a layman’s summary.  Historically, US GAAP has been rule based leading to the criticism that entities design transactions to thwart the intent of the rules.  Principle based standards would force accountants and auditors to use their judgment and stand by that.  Google produces over 14 million hits for “accounting rules versus principles” so it is a hot topic.

This old accounting debate becomes new again with Michael Barone’s review of Philip K. Howard’s The Rule of Nobody: Saving America from Dead Laws and Broken Government.  Howard’s argument is familiar to accountants:

“Legal rigidity trumps everything,” Howard writes. “Law has crowded out the ability to be practical or fair.”

American laws and regulations tend to be over-detailed and to rob government officials of all initiative and, therefore, responsibility.

It is the accounting rules versus principles argument moved from financial accounting to government applications.  We do not consider principle based standards a silver bullet.  Less regulation of government will lead to government employees taking initiative but will all that initiative be positive from a outcome point-of-view?  Smaller government still seems like a better bet for improving government.  If government is in charge of less it will have less opportunity to be over-detailed.

In this process we must take Congress to task for failing to set outcomes or failing to enforce outcomes.  When programs don’t meet their objectives there might be other reasons than underfunding.