Non-Local Politics

The headline in the local paper was: “This Is Not Hypothetical.”  Then they go on to talk about how Mayor Tim Kabat of our modest hamlet had decided that he needs to help the The Donald with climate change.  We hate to go all Webster on folks but says hypothetical means:

1. assumed by hypothesis; supposed:

a hypothetical case.
2. of, pertaining to, involving, or characterized by hypothesis:

hypothetical reasoning.
3. given to making hypotheses.
4. Logic.
  1. (of a proposition) highly conjectural; not wellsupported by available evidence.
  2. (of a proposition or syllogism) conditional.

We left the fourth definition in to give some hope to the headline writers.  They were trying to discuss a logic problem.

Climate change, nee global warming, is part of science and science is about hypotheses.  Climate change is a hypothesis or a bunch of hypotheses.  It is exactly a hypothetical.  In science a hypothesis is accepted until evidence leads to its rejection.

Sidebar: An enormous problem with climate change is the lack of precision.  For example, the efficient market hypothesis (EMH) has weak, semi-strong, and strong versions.  We suggest, partly in jest, that climate change adopt historical, reasonable, and hysterical.  End Sidebar.

There is also a second level of science: economics.  Once we decide about climate change then there is the issue of economics.  The cost to have a substantial impact on hypothesized climate change is large.  Is it worth the cost?  For example, we would support a modest carbon tax because the cost is small and the incentives are right.

The local paper has tied Mayor Tim to the local head of the Sierra Club:

Van Gaard warned that without immediate and drastic efforts to reduce greenhouse gas emissions, millions of people will be left without clean water and food and millions more will be refugees as a result of extreme weather events.  “This is not a hypothetical. This is already happening. This is our future if we don’t take this seriously right now. Fuel efficiency standards are a necessary step to move us away from that future,” Van Gaard said.

We are unconvinced that the fuel efficiency standards are a necessary step. We need to analyze the alternatives.  Immediate and drastic actions will have enormous costs.  The millions and millions have turned out to be wrong several times.  The Sierra Club is welcome to try to influence policy.  It doesn’t look like a good trade-off but let’s look at the full cost of the alternatives.  It is hypothetical and we need to consider the alternatives and the risk involved. Meanwhile, we need our mayor to be worried about serious city stuff.


Judging Intentions

Judging intentions is extraordinarily difficult but pundits seem to do it regularly without care and often without evidence. Our latest perp is from Jonathan Coppage’s article, Our Infrastructure Inefficiency, in NRODT.  Jonathan’s article is otherwise excellent and worth reading in detail.

Sidebar: Not only are we behind on our reading but we are behind on technology because we can’t reference it. Mea Culpa * 2.  End Sidebar.

After Jonathan says that current federal law has buy American standards including a 100 per cent rule for manufactured items he seems to excuse it by saying:

While well intentioned in their concern for American manufacturing, such policies can inflate the cost of [American] infrastructure.

We have a suggestion for a rewrite:

It is wildly difficult to determine the intent of Congress and it is even more unlikely that every member of Congress has the same intent.  It is easy to determine the impact of tariffs and other restrictions on trade like buy American.  The impact is to provide concentrated benefits, in this case for certain manufacturers, and to widely disperse the costs, in this case over all federal taxpayers by increasing the cost of American infrastructure.

Yes, it is too long compared to what it replaced but we had much to explain.  We think our last sentence is obvious but not everyone will.  Jonathan should be as enthusiastic about eliminating buy American as he is with the other elements of infrastructure reform.

Vacation In Venezuela

We provide transportation to four-year-old kindergarten for one of the grand-deGloves. The letter of the week was V and one of the teachers said today’s subject would be Vacation In Venezuela.  In fact, they liked Vacation In Venezuela so much that they extended it to two days.

Of course, our immediate thought was why are you glorifying that hell-hole? Yet we refrained from comment despite the facts.  On the Heritage ranking of economic freedom it is 179 of 180.  Six countries are not ranked.  To put it kindly, it is a violent place without a reliable government.  About a year ago the LA Times said:

Venezuela’s violent crime epidemic appears to be escalating into a full-blown humanitarian crisis. The precise dimensions are hard to know, however, because along with the collapse of the economy and widespread hunger has come a near blackout of reliable government crime statistics.

Nothing we have seen suggests the situation has improved since then.  We are convinced that it was appropriate to leave this as a politics free zone.  There are not many countries that start with V: Vanuatu, Viet Nam, Venezuela.  The kids are just four.  The discussion is not about governments but geography and letters.  We are happy with our choice.  The question is when should we speak up?

Hating The Donald

We were wandering around the Internet.  First we went to Tyler Cowen’s Marginal Revolution site. Tyler is a serious economist.  Wikipedia tell us that:

He was ranked #72 among the “Top 100 Global Thinkers” in 2011 by Foreign Policy Magazine “for finding markets in everything.”[4] In a 2011 poll of experts by The Economist, Cowen was included in the top 36 nominations of “which economists were most influential over the past decade.”

He said that Christopher Lebron at the Boston Review had the best review of Black Panther.  We are interested in the movie and want another review.  Armond White has never been very helpful for us.  Armond is too worried about philosophy and has too many reference to movies we haven’t seen.  We want to know if the movie is entertaining.  We thought the Greatest Showman was a really entertaining movie.  We were shocked at how good it was after so many poor movies recently.  Interestingly, the preview from the star and director suggests that they wanted to make an entertaining movie.  Perhaps it is not hard to make an entertaining movie if that is your goal.

Tyler does say the review is via Hollis Robbins but we think he should read it to link to it.  Here is part of the first paragraph of Christopher’s review:

This is a tall order, especially in the time of [The Donald], who insists that blacks live in hell and wishes that (black) sons of bitches would get fired for protesting police violence.

We wonder what somebody would need to say about a political figure to have it be a bad review?  We don’t know much about the Boston Review.  They might think it crucial that they signal their hate of The Donald to their audience.   We are, however, disappointed in Tyler.  He should understand the importance of  rhetoric.

Ignore Income Inequality

Income inequality seems to have great resonance.  An example is where Scott S. Powell argues in the WSJ that we should do away with or change Sarbanes-Oxley (SOX) because it increases income inequality:

With corporate tax reform in the rearview mirror, Congress and the Trump administration should pare back a misguided regulatory regime [SOX] that imposes unnecessary costs on public companies, discourages initial public offerings, and skews the distribution of wealth toward the very rich.

We would support adjustments to SOX but not because it changes income inequality. In addition, it is not clear what impact SOX has on income inequality.  More public companies might mean more rich folks.  On the other hand, Michael Tanner has a great article at NRO where he takes issue with what he properly describes as our dangerous obsession with income inequality.  Read it all but here is how he starts:

Yippee! Last week’s sell off on Wall Street wiped out more than $3 trillion in wealth. Overnight, economic equality increased. True, you and I aren’t any better off — in fact, some of those losses came out of our 401(k)s and pension plans — but the important thing is that the biggest losers were evil rich people. Warren Buffet lost more than $5 billion, Jeff Bezos more than $3 billion. All together, the world’s 500 wealthiest people lost more than $180 billion. Aren’t you happy?

He answers his rhetorical questions with of course not.

Sidebar: One of the problems with our dangerous obsession over income inequality is the challenges of measuring it.  The losses Michael describes are not part of a US tax return so it would be difficult to measure the impact.  Two major problems with any argument about income inequality is how to measure it and what is the goal using that measurement system.  End Sidebar.

Michael points out that capitalism has provided great benefits in the US.  Others (here is a video) have pointed out how it has helped the the world.  We need to promote economic freedom, defeat crony capitalism, and protect the needy.  Any argument that cites changing income inequality as a benefit should be ignored so that we can focus on serious stuff.

Expected News

When folks as us about The Donald as president we have taken to saying that we hope the next seven years go as well as 2017.  If asked we are quick to say that it is unlikely that The Donald will have a year as good as 2017 between now and 2024.

This week brought more of what we expected from The Donald.  The NYT tells us he has continued to be an avid deregulator:

The Trump administration has adopted new limits on the use of “guidance documents” that federal agencies have issued on almost every conceivable subject, an action that could have sweeping implications for the government’s ability to sue companies accused of violations.

Powerline might be a little enthusiasic when it describes it as fantastic news but The Donald continues to be a great improvement over his immediate predecessor (HIP) or the alternative in 2016.

We knew when we elected him that he was not interested in reforming entitlements or reducing the deficit.  The Donald shared that with HIP and the alternative so voters didn’t have a choice in that area.  The did have a choice on regulation and taxation.  Kevin Williamson at NRO takes many politicians to task:

Like so much else in Washington, [debt] is speeding out of control with no working brakes and no one apparently at the wheel. As Herb Stein famously put it, “If something cannot go on forever, it will stop.”

James Freeman at the WSJ is worried about the Trump Spending Binge too and focuses on the government’s interest payments:

The Trump spending blowout is particularly dangerous because, as stock investors have noticed lately, interest rates are headed north. Washington will spend about $300 billion this year in net interest payments on the federal debt. Last summer the Congressional Budget Office estimated that this annual burden will grow to more than $800 billion by 2027, when it is expected to be more expensive than the entire Medicaid program by some $163 billion per year. This depressing scenario assumes the average annual interest rate paid by Washington rises to just 3.5% by then, still relatively modest by historical standards.

We agree with Kevin and James that we should be working on the deficit.  We support entitlement reform and a tax on carbon to reduce the deficit.  We wish it was now Mitt’s second term but it is not.  It terms of the deficit, HIP was an awful choice and The Donald was better than either the 2016 alternative or HIP because he prioritized economic growth but none of them were good for the deficit.

It is going to be harder to fix the entitlements and the deficit later but there is so little interest in it.  The politicians are not interested and only a few of the voters are.  Lots of writers are but we must not be writing well enough. We would like to get more than we expected from The Donald but we can’t be displeased at actually getting what we expect.


Too Kind

David R. Henderson is exactly right in his title but way too kind in his WSJ Op-Ed entitled A War On The Rich Won’t Help The Poor that analyzes the Oxfam report Reward Work Not Wealth.  David starts out with a dichotomy that he shows a counter example of later:

There are two ways to close the gap. The first is to concentrate on making the poor better off. Mostly that has happened, thanks to liberalized international trade and reduced costs for shipping goods. Just as Walmart and Amazon have cut costs for Americans, the introduction of container shipping crushed transportation costs for the world. The second way to reduce inequality is to make the rich worse off. Any guess which method Oxfam’s report emphasizes? “Governments should use regulation and taxation to radically reduce levels of extreme wealth,” the authors conclude.

The problem is that he has accepted the Oxfam starting point that inequality is the problem.  Inequality is not the problem and Oxfam is (or perhaps no longer is) an antipoverty organization as David describes it.  The Oxfam report uses the catch phrase, “Even It Up.”  The first might not close the gap as David demonstrates:

Say that wages in a developing country rose by 10%, and in the U.S. by only 1%. For a family in the poor country earning $2,000, that would mean an extra $200. But for a family in the U.S. making $50,000, it would equate to $500. In other words, income inequality would increase, even though wages grew 10 times as fast for the poor family.

The second way has no assurance that it will close the gap either.  Eating the rich, or some variant of it, will likely have a negative impact on the poor.  Will the gap, however measured, be reduced or increased?  It should not matter because making the poor worse off is a bad idea.  Go check out Venezuela.  We are sure there are studies of various plans to punish the rich but we doubt they are definitive.  The solution is to work on poverty by encouraging markets, rule of law, free trade, allowing GMOs, and so on.  Income inequality is uninteresting and unimportant.  Don’t get sucked into it.

Healthcare And Incentives

Clark Harvighurst, professor emeritus at Duke, writing at the WSJ Editorial Page has an interesting article related to health-care and taxes.  He mostly addresses it to three CEOs, Bezos, Buffett, and Dimon who he summarizes with BB&D.  We love the ampersand too Clark.  We are 100% in agreement with his point that excluding health-care benefits provided by employers from employee income is major problem with the US health-care system.  We are not convinced, however, that folks react exactly how he describes.

To be clear, when an employee receives health-care benefits paid by the employer it is valuable to the employee but it is not part of gross income as determined by the Internal Revenue Code.  Specifically:

Under IRC sections 105 and 106, employer-provided health benefits, including reimbursement and insurance, are generally excluded from the income of employees.

It is one of those weird parts of the tax law that excluded almost $22,000 in income from MWG tax return a few years ago.  We agree that BB&D would provide a major service if they pushed to treat health-care income as taxable like other income.  We are not convinced that the beneficiaries are acting as Clark says.  Here is his quote:

Because employees don’t pay taxes on employer-paid insurance premiums, most workers assume that—and behave as if—their health-care costs are borne by employers. True, most employees now pay some share of premiums directly, along with copayments and deductibles. But they still unknowingly pay far more in lower take-home pay. When working Americans say they like their health plans, it’s clear they aren’t seeing the whole cost picture.

We don’t see it that way.  It seems to us workers act as if health-care costs are not taxable while wage income is.  Thus, getting a whole dollar of health-care insurance rather than a dollar of wages that are reduced by FICA and income taxes seems rational.  We think they are knowingly taking less take-home pay.  Folks buy way too much insurance (they cover everything they can) because it is cheaper with before-tax-dollars.

Sidebar: Another problem with the current system is that a few folks are worse off under this deal.  An example is the Lady de Gloves who did not take the health-care play offered by her employer because MWG was already covered.  She got nothing while most folks got thousands of dollars worth of insurance.  End Sidebar.

It is also rational for the employer since they pay a dollar in health care instead of a dollar plus FICA.  So we see the current system as a rational reaction to the current irrational tax system.  We do agree with Clark that the current system makes many of us uninterested in that actual costs of medical care.  We entirely agree with Clark that we hope BB&D can change the tax treatment of fringe benefits.  If we can fix corporate taxes then why not this?


Priorities are critical.  As department chair, we have lots of nodding agreements supporting this, that, and the other thing.  Chairs have a long list of goals but because of the regular demands of the office like budgeting, scheduling, and students and the difficulty of creating coalitions only a few priorities ever get addressed.

Sidebar One: We recollect it was Woodrow Wilson used his experience to compare politicians to college faculty and administrators.  We found the quote here: “As compared to the college politician, the real article seems like an amateur.”  We don’t have Woodrow’s experience but tend to agree.  End Sidebar One.

The same is true of formal politics at every level, especially the national level.  The recent State of the Union speech was criticized because it, like most of it predecessors, was a long laundry list without priorities.

Sidebar Two: Well, it seemed to us that immigration was the priority.  We think that one priority, especially immigration, is OK. End Sidebar Two.

We are interested in what to push.  We had mused about the possibility really free trade rather than the mixed results of agreements like the Trans-Pacific Partnership.  Michael Brendan Dougherty’ polemic against free trade helps us see the difficulty of such progress. To his credit he recognizes that his position on taxing assets (nonproductive property) puts off folks but then he tries to lump the free traders with him.

First, he tries to link open borders with free trade:

We should not fool ourselves that somehow some authority out there called “the market” wants no limits on the supply of labor and then open our borders in response. Doing so against the consent of the people would jeopardize the democratic character of our society and doom what’s left of the egalitarian ethic that makes democracy possible.

The Venn Diagrams of folks for free trade and open boarders do overlap, especially on the WSJ editorial page, but they are two different things.  We are in the part that doesn’t overlap.

Next, he tries this:

Governments have a right and sometimes a duty to inspect what comes into their ports, not only for security reasons but to enforce the rules of the market that entrepreneurs depend on.

This is certainly a duty and great opportunities for cronyism and graft.  A small example of cronyism is when Irish butter was banned in Wisconsin.  It is part of the argument for thousand-page agreements. The US would like other countries to limit non-tariff issues to security and market concerns.  The problem is the agreements expand into questionable areas.

[Ron] Paul [as an example of a doctrinaire libertarian] thinks that if Japan’s government subsidizes the manufacture of a car to the tune of $4,000, then American consumers should just rake in the free gift from Japanese taxpayers. I do not. I think mercantilists can erode the support for worthwhile trading arrangements in both countries at once. I similarly fear it will be deleterious to a liberal system if these nations succeed in creating monopoly pricing power for their firms.

We support the American consumers as Paul does.  Part of the reason is the accounting problem of what is a subsidy?  Another part is the difficulty of creating monopoly pricing power.

Lastly, Michael gets into a double dose of security.  First, we need military stuff and we can’t depend on other counties for it and second, the US Navy is critical to maintaining the freedom to trade.  The first part seems like a good argument to support fracking but at least some military stuff will need to be imported.  From whom seems to be the interesting question. We agree on the importance of the US Navy but fail to see any connections with tariff policy.

If conservatives are this far apart on priorities it is easy to see why political progress is hard.  It is not clear what priorities Michael has other than never Trump although he seems to be on the social and international beat.   He tried humor, we think, in Anthony Kennedy Can’t Be Allowed To Die.  Arguments matter but it will be hard to support any of Michael’s political priorities ahead of ours.  Baseball is another matter entirely.


Hands Off Venezuela

The Weekly Standard recently had and editorial and support piece by Barton Swaim on getting Maduro and his cronies out of Venezuela.  We don’t think such an aggressive stance is warranted.  The support piece quotes the editorial:

The reality is that the Chavistas must be deprived of their oil. Otherwise Maduro stays, and Venezuela’s nightmare continues. If the Trump administration wants to rid the Americas of their most odious regime, it will have to embargo Venezuelan oil. Announce the decision six months in advance: Maduro and his cronies step down peacefully or the U.S. deprives them of their only real source of money. In the meantime, strengthen the opposition with clandestine funding and overt encouragement.

Barton goes on to suggest that an alternative is to have a Venezuela airlift like the one in Berlin.  Except it wouldn’t be anything like it.  The most important difference would be that the allies controlled West Berlin according to treaty.  Then Barton goes on to conclude:

It [the airlift] might be a wild idea. Perhaps the saner move would be the more immediately consequential one of embargoing the country’s oil. But either is better than watching another generation of Venezuelans starve.

There are two problems with US intervention leading to regime change in Venezuela:  First, the set of variables are large and the possibility of disastrous outcomes is too large.  The Knowledge Problem will make us ineffective.

The results would not be limited to Venezuela.  US actions in Central and South America reverberates through all of Latin America.  As NRODT tells us, Argentina has made remarkable progress in the last few years.  Still, including the Caribbean, according  Heritage, it is home to six of the 23 repressed economies in the world.  Why do we take aggressive steps to fix the other five?

The empathy of Barton and the others at the Weekly Standard speaks well for them.  Unfortunately, it is not something that we can fix.  To create a working economy the Venezuelans (Zimbabwean etc.) need to fix it for themselves.  We hope that they renounce socialism immediately but it is up to them.