In Defense Of Saab

We took great umbrage at the beginning of Kevin D. Williamson’s new NRODT article, Elizabeth Warren Is Wrong About Pay Day Lenders, (we are bit sure about the paywall) that comes out early on NRO.  Of course, any article that starts with “Elizabeth Warren Is Wrong” is likely to be good and the article is terrific and you should read it all.  You should subscribe if you haven’t.  The problem is the beginning.  Kevin says:

Do you know who the car-finance guys really miss? “Saab,” he said. “The Saab customer was the best.” The people who bought Saabs turned out to be as sensible and practical as the people who designed them — good credit, appropriate incomes, sensible down payments. “It wasn’t like Porsche or Land Rover,” he said. “Nobody bought a Saab because it fulfilled some fantasy.”

We loved our Saab.  Now our love might have been augmented by the fact that it replaced the Toyota with over 400,000 miles that would only start if you put a coat hanger in the carburetor just before you cranked the key and then removed immediately after the vehicle started.

Sidebar: Here is a cite for those of you that don’t know what a carburetor is.  We are pretty sure that the Saab was our first fuel injected vehicle.  End Sidebar

It was fortunate that the Toyota hood (like the Saab) was hinged at the front so starting it only required a mild bit of contortion.  The Saab not only started all by itself but it was responsive, was a joy to drive, and had a heated seat, another thing that has become standard but wasn’t several decades ago.  It also had its practical side with front wheel drive (another innovation) and big tires that took the worry out of Wisconsin winters.

Why is Kevin’s article great?  First he makes this point:

Being poor sucks, and no regulation is going to change that.

Later he expands on exactly why:

Of course, there are a lot of broke-ass suburbanites driving around in Land Rovers they cannot really afford. It is not only the poor who make bad financial decisions. (I could produce a conspectus [your word of the day] of my own.) But the poor always have less room for error, and for their errors, as for most things, they pay a proportionally higher price.  [Emphasis added]

The play Fences has some great examples of the poor making good and bad decisions.  The dad, Troy, discusses with one of his sons if they should fix the roof or get a TV.  Troy isn’t as poor as some but he he trying to show his son exactly the problem Kevin describes.  They can only do one or the other.  Troy is working poor but his good financial sense allows him to help out others at the cost of some advice.

Kevin would like the Fences model but recognizes, unlike Elizabeth, that pay day lenders might be the best option for many folks.  Too bad he never yearned to have a Saab of his very own.

Full Employment: Accountants Only

We love accountants.  We spent the majority of our life educating them.  Unfortunately, we cannot support the plan for a massive expansion of the opportunities for accountants.  Veronique De Rugy at the NRO Corner has the details on Elizabeth Warren’s proposed wealth tax.  You should, of course, read the whole thing.  The tax is loosely justified as a response to income inequality but as we have often said the issue is really envy.  Finding the levers to adjust income inequality and agreeing on the right level of inequality are akin to trying to predict climate change.

The one sure thing is the wealth tax will provide lots of opportunities for accountants. Veronique right when she tells us:

That’s why wealth taxes are always so hard to administer and so easy to avoid. It makes them a terrible vehicle for raising money. [and later]

But apparently the senator thinks she can avoid any problems by implementing anti-avoidance measures such as a repressive 40 percent exit tax on any targeted household that attempts to emigrate, minimum audit rates, and increased funding for IRS enforcement.  [Emphasis added]

Because it is off her topic she has left out is all the opportunities for the accountants in the private sector to avoid or reduce the tax.  She mentions that a wealth tax might be unconstitutional.  There is also the issue in bold above.  Can we really tax people that want to leave such a repressive regime?  On both those questions it is wise to reject the proposal rather than count on the courage of the Supreme Court.  Especially when the left wants to pack the court.

One issue we would like to see discussed is the impact of the wealth tax on wealth.  We don’t have a complete model but when wealth produces about eight percent returns and you tax it at two or three percent then the returns on assets are substantially reduced.  That, it seems to us, would reduce the value of assets.  The folks that pay the tax own lots of assets and lots of them are equities.  Equities won’t have two prices.  Will the wealth tax reduce the value of equities?

A wealth tax is at least a really bad idea for everybody but accountants.  It might be absolutely terrible if it has a major negative impact on equity prices.



Bad Evidence Leads To Wrong Conclusion

We have some longer or deeper things we are trying to work on but folks keep writing foolish things that need to be dealt with.  In this case it is Jeff Spross at The Week.  The Week appears to be a serious publication with, one would think, editors. How, then, did Jeff’s “How The Democrats Can Raise Taxes Without Technically Raising Taxes” end up on The Week?  We don’t know.

Jeff sets up the article by discussing that the The Donald’s administration decided not to index capital gains for inflation.  Then he says:

But Democrats — or anyone, really — should take a hint from Trump’s decision. It’s not just that capital gains shouldn’t be indexed to inflation; income taxes shouldn’t be either.

Doing away with that indexing would raise plenty of new revenue for the government. But more fundamentally, it would fix a basic misunderstanding about good macroeconomic policy.  [Emphasis added]

Jeff is serious.  And he is seriously wrong.

Sidebar One: Jeff has no comment on the standard deduction which is also currently adjusted for inflation.  End Sidebar One.

It doesn’t seem to us that “You are paying more taxes but we didn’t really raise your taxes” is much of a rallying cry for any party.  The more serious problem is Jeff’s understanding inflation.  Here is Milton Friedman explaining that inflation is a monetary phenomenon.  In the United States, Milton tells us, inflation is made in Washington DC.

Sidebar Two: If you want you can now discuss the extent to which the Federal Reserve, which controls the money supply and hence inflation is independent within the government.  You can come back to that discussion later as it might take a really long time.  End Sidebar Two.

Jeff doesn’t agree with Milton. Jeff thinks inflation is caused by supply-demand problems.   Jeff says that we need higher taxes as a brake on an overheated economy:

Here’s the problem with that logic: If your economy is experiencing high inflation, like what we went through in 1980, then it needs to slow down. Mainstream macroeconomics assumes that high inflation is evidence of an overheating economy: too much demand chasing too little supply. In which case, to cool inflation off, money needs to be taken out of the economy. And taxes are one tool for doing just that.  [Emphasis added]

There is a big problem with Jeff’s example.  We checked the economic data for 1980 at The where they have unemployment at year end, GDP growth, and inflation by year on one page.   It was really easy to find and somebody at The Week should have checked.   At the end of 1980 the unemployment rate was 7.2 percent, GDP growth was negative signaling a recession, and inflation was 12.5 percent.  So Jeff’s example contradicts his theory.  Rather than the economy being overheated it was in recession.  How about Venezuela?  Nope.  Zimbabwe?  Nope and you can even use the same cite for that and more.

Few people have been more exactly wrong than Jeff when he says that indexing income tax brackets is pro-inflation:

By contrast, brackets that are indexed to rise with the price level are essentially pro-inflation. As the inflation rate increases, the rate at which the bracket thresholds rise increases as well. That’s a fiscal stimulus added to the economy right when it’s already running too hot. In fact, Russel Long, a Democratic senator from Louisiana at the time, made this exact point, arguing indexing would “make inflation worse by pumping more money into circulation at a time inflation is at its worst.” [Emphasis added}

Inflation is at best independent of real economic growth.  What makes Jeff so wrong is that the government (see Sidebar Two above) controls inflation.  To have the government benefit from inflation by increasing receipts from bracket creep is a really bad incentive for folks who want to avoid inflation.  Hint: that should be almost everyone.  Indexing brackets is strongly anti-inflation because the folks that control inflation, the government, have fewer incentives to inflate.  It is really important that inflation indexing for brackets and standard deductions stay.  It is also really important to check the data that you rely on.



Sports, Asthma, And Original Work

We are no fan of Joe Biden.  We shouldn’t stand for big smears of Brett Kavanaugh, The Donald, and almost everybody on the right.  We shouldn’t consider them for Joe either.  Part of the problem is referencing an original work.  Jim Geraghty at the NRO Morning Jolt talks about the Brett smear and then ends with:

Of course, Michael Graham wonders how Biden could work as a lifeguard during the summers in college and simultaneously be medically excused from Vietnam for “asthma as a teenager.”

Jim has not smeared Joe but he is moving in that direction from Michael’s work.  Michael was not asking how Joe could be a lifeguard although he did wonder about football.  He is making a comparison between Joe and The Donald.  Michael says:

Just a few months before President Donald Trump received his now-infamous diagnosis of “bone spurs in the heels,” former high school football star Biden got the same 1-Y draft deferment for “asthma as a teenager.” It was one of five deferments Biden received (the same number as notorious GOP “draft dodger” Dick Cheney) and allowed him to avoid being drafted at the height of the war.

Michael’s main complaint is with the Democrat double standard although he seems to wonder if this is how the Democrats will get Joe.  Michael reports:

Does this prove that Biden was dishonest or made a false claim? No. But a similar story from [The Donald] was enough for Sen. Tammy Duckworth (D- Wis.), who was wounded while serving in Iraq,  to label [The Donald] a “coward.”

We have observational experience with asthma in athletes and medical deferments for Viet Nam.  The Princess de Gloves was an athlete including being a competitive swimmer, lifeguard, and swim team coach that had asthma.  We don’t know if it would have got her out of military service but we remember her pulling out her inhaler once when she was pitching in softball.  At the time swimming was thought to be good for asthma but now folks are uncertain.  At any rate, Joe was not the only lifeguard with asthma or football player that received a medical deferment.  Joe is nowhere near being unique.

We are a little younger than Joe so we know a number of folks that received medical deferments from military service during the Viet Nam era.  None of these folks were rich or famous so that is not why they were deferred.  We remember heart murmurs, flat feet, and hypertension as causes for deferments and we are sure there were others.  We would have judged our friends as at least healthy and some were athletes.   We concluded that they won the lottery.  We don’t know if any of our observations faked something but there was lots of information, perhaps not good information, on how to fake stuff.  Unless we see cold, hard evidence that Joe or The Donald faked something we have no reason for additional comment.  In fact, here is where the Brett smear comes back into play.  If Brett did something rude as a college freshmen or Joe or The Donald gamed the system 50 years ago how does this impact fitness of any of them for a position today?  For example, if you cheated on an exam in high school are you disqualified from holding public office?  It seems to us that we have more recent and relevant information to make that determination.  Let’s worry about Joe and Clarance Thomas or Joe and Barack rather than irrelevant stuff.




Jonah’s Bogus Journey

Conservatives, and especially those of us in fly-over country, tend to poke fun at the coastal leftists that try to discover these hidden tribes with odd beliefs that lurk in these strange burgs that the locals often pronounce wrong.  Places like Cairo, Illinois.  Jonah Goldberg, writing at NRO, goes on a similar journey as he tries to understand folks who support The Donald.  As if we didn’t know, Jonah tell us where he stands on The Donald at the end of his journey:

It may be that once [The Donald] is no longer the commander in chief in the war against Blue America, the ardor of his troops will give way to a better understanding of the price the GOP paid on his watch.

It is difficult to write about stuff you don’t understand.  Jonah put the question about The Donald’s approval rating by Republicans this way:

[The Donald] is consistently hitting in the mid- to high 80s with Republicans in polling, which demands a question: Why are his actual numbers so high?

When you write or talk about what you don’t know you sometimes get distracted and forget what you know.  Jonah knows many things but two things he knows for sure are, one, approval of The Donald, or anyone else, is a yes or no question. Two, in any coalition, like The Donald’s, there are lots of different factions.

That means that Jonah’s emphasis on “unwavering support” for The Donald is not related to his approval rating.  There are folks that give unwavering support or unwavering resistance to The Donald.  We are open to evidence but we don’t see these as large the largest groups in either coalition.  There are supporters of The Donald that love his twitter feed but many would lock him out.  Others like his trade wars while we hate them.

Jonah does have a point that hyper-partisanship on one side causes some on the other side.  It is like arguing with your roommate about sports teams and folks say things like no player from Arsenal could start at Tottenham (or vice versa) and things escalate from there.  Some of the Republicans are rabid supporters of The Donald but we think more are like us.  The Donald has done good things on regulations, taxes, the court appointments.  Then there is the alternative.  First, there was the choice in the 2016 election.  We thought The Donald dominated his opponent.  The alternatives have not gotten better since then.  Kevin D. Williamson at NRO puts the choice in his usual acerbic manner:

Eliminating the ability of those who currently align with the Republican party to meaningfully participate in national politics is not only wishful thinking in the pages of the New York Times. It is the progressive program, from Washington to Palo Alto and beyond.

The Editors at NRO tell us about Elizabeth Warren’s (and some other Democrat presidential candidates) plan for eliminating fracking:

Senator Elizabeth Warren of Massachusetts promises that if she is elected president, she will issue an immediate unilateral prohibition — based on some presidential power that she’ll invent as soon as she gets around to it — on the method of natural-gas production known colloquially as “fracking.” Other Democratic contenders, including Vermont socialist Bernie Sanders and Kamala Harris of California, have made similar promises.

It is not just AOC.  People that you might describe as serious senior leaders of the Democrats are making The Donald look good now and in 2020.  Like many other folks on the right, we approve of The Donald.  Our judgment is he is far from perfect but he has done some good things and we don’t approve of the opposition.  We hope Jonah will reverse the Bill and Ted franchise and soon go on an excellent adventure.  Strange things are afoot at the Circle K … and in the whole country.

Carbon Tax Analysis

It depends is the most reliable answer to almost any question other than is socialism a good idea?  It is particularly true as an answer to the following: should the US have a carbon tax?  Our starting points are that first, the left wants a carbon tax so there is space to negotiate with them.  Second, a carbon tax is conceptually a good idea because there is some relationship between carbon and global warming and we would, all other things being equal, like to reduce carbon emissions.  Third, a carbon tax is a good way to do that.

Paul Mirengoff at PowerLine has a discussion of carbon tax that we would like to review. We agree with much of his analysis but not his final decision.   Paul is correct that that the cost would be borne by consumers:

First, the cost of the carbon tax would be passed on to consumers:

While oil, natural gas, and coal companies would be responsible for paying the fee, they would likely pass a significant share of the associated cost on to their customers.

Yup, no doubt.  We are willing to agree that 100% will be passed on to consumers.  The GOP should see that low income folks are not sacrificed.  There are many ways to do this but the most obvious would be to reduce FICA, the biggest tax for most low income folks.  Make the first N thousand dollars of income not subject to FICA where N is the number that eliminates the impact of the carbon tax.

Sidebar: We could make this complicated and decide that only N at the first job applies.  We don’t think so.  If somebody works several different jobs we are OK with them benefitting from reduced FICA several times.  We think it is not exactly “fair” but the costs are not worth the benefits.  End Sidebar.

Like tariffs, sales taxes, and VATs it will fall more heavily on low income individuals:

Second, a carbon tax would have a disproportionate impact on low-income households:

As with the increase in energy costs, the increase in the cost of nonenergy goods and services would disproportionately impact low-income households.

Yup, no doubt.  Again, this can be fixed.  FICA is part of the solution.  Another part is to eliminate the gas tax that is currently 18.4 cents per gallon.

Paul might be right that is is not popular but we think presentation might matter:

Not surprisingly, the carbon tax is unpopular with voters. Indeed, Americans for Tax Reform notes that carbon tax advocates haven’t been able to get a carbon tax passed in a single blue state.

Two items are worth mentioning here.  First, carbon taxes by state are a really bad idea.  Second, in a purple USA, we can get a carbon tax that is modest and allows us to do good things like eliminate subsidies to alternative energy.  As our tweeter-in-chief might say, it all depends on the deal.

Again, in summary, a modest carbon tax, say, $20 per ton, that eliminates the gas tax and alternative energy subsidies while reducing low income FICA is a good idea.  We don’t know if the Democrats are willing to make the deal.  It might even be good politically even if they are not willing.


Hard Times Make Hard People

We accompanied the Lady deGloves to American Players Theatre (APT) in Spring Green, WI to see August Wilson’s Fences.  It is about the African-American experience after WWII.  We went with hope and trepidation.  Our trepidation came from Fences winning the 1987 Pulitzer Prize for Drama.  We figured that prize would be evidence of its leftist bona fides.  We don’t want to spend a night listening to a recitation of grievances.  Political points in entertainment need to be subtle.  We had hope because APT is a place of quality and integrity.

Much like the Pats over the Steelers (33-3 in case you didn’t see it) hope won in a rout.  We had to check to see if it was written by George Will.  It is an unflinching yet loving look at the black experience during the postwar years.  The play is set in Troy Maxson’s house and yard in Pittsburg during the late 1950s although you need some local knowledge to figure it out.  Roberto Clemente is playing for the Pirates and he debuted in 1955.  Troy’s son plays music at the Crawford Grill and they read the Pittsburg Courier.  Troy’s death is six or seven years later and the voice over montage includes Malcolm X (we think his assassination) which would take us to 1965.

Troy is a hard man that had seen really hard times.  He was one of ten (?) children of a sharecropper who left home at 14.  Troy came North to be homeless and a thief.  He killed a man.  He didn’t take our 44th president’s advice and brought a knife to a gun fight and, like in the Magnificent Seven, won.  He did time in prison and then was a power hitter in the Negro Leagues.  Although the color line has been broken in MLB by the time of the play Troy is rightly upset of his missed opportunity and that there are still some mediocre white players starting.  Troy didn’t share Buck O’Neil’s outlook.   Now he works picking up trash for the city.  During the course of the play he becomes the first black trash truck driver despite not having a license.

Troy became a hard man during these hard times.  He watches out for himself as he obtains a house for his family and his brother Gabe with the money Gabe got for brain injuries during WWII.  He has a loving wife Rose played wonderfully by Karen Aldridge who he betrays by having an affair that leads to a baby.  The mother dies in childbirth and Troy brings the innocent home that leads to a great scene.

Fences is an excellent play made extraordinary by APT.  It is about personal responsibility and family.  It has a wonderful and shocking conservative outlook on life, family, and religion. Troy and Rose have kept their family together during the Great Depression, WWII, and Jim Crow but Lyons has already broken up his relationship and we know from reading George Will and others that the black family will have bad times in the years to come despite the progress made by blacks as shown by breaking the color barrier in MLB, Troy becoming a driver, and legal improvements.  Troy’s children will have a harder time keeping a family in a much less hard time.

It is such a good play because its political outlook is subtle.  The play doesn’t beat us over the head.  Troy, Rose, and the rest are interesting and imperfect.  You should see Fences and enjoy them.

Carbon Tax Again

There has been some discussion if the CNN Climate Change Town Hall was more boring that the Bears-Packers game that opened the 100th season of the NFL.  The game had 17 punts, 20 penalties, and one touchdown.  Holman W. Jenkins, Jr. at the WSJ watched enough of the Town Hall to weigh in.  He ties it to a Harvard professor and some science stuff that the Town Hall folks allege they worship:

It comes just days after the shocking suicide of Harvard climate economist Martin Weitzman, rightly praised in obituaries for an insight lacking in the CNN town hall: A climate disaster is far from guaranteed. It’s the low but not insignificant chance of a “fat tail” worst-case disaster that we should worry about. (Mr. Weitzman put the odds at 3% to 10%.)

We had not heard mention of it before but it appears that one of MWG favorite topics came up briefly at the Town Hall.  Holman tells us

As the New York Times also noted, “For the first time, Ms. Warren explicitly embraced a carbon tax before quickly pivoting away . . .”
What’s Ms. Warren afraid of? A carbon tax would hardly be prohibitive. Weitzman advocated $40 a ton—the equivalent of 36 cents per gallon of gasoline. Such a tax could be implemented without raising the overall tax burden; it could be used to trim taxes on work, saving and investment, improving the economy overall. It could be embraced and copied by other nations out of self-interest rather than self-abnegation (unlike the absurd Green New Deal). [Emphasis added]

A carbon tax of $40 is twice what we have suggested but it is on the upper end of modest range.

Sidebar: We are really pleased that our back-of-the-envelope computations agreed with Holman and, perhaps, Martin.  We estimated that $20 per ton would be equal to the current federal gas tax of 18.4 cents per gallon.  The part in bold shows that we had the relationship right.  Wheeee!  End Sidebar.

It also matters what else is done.  We like Holman’s suggestions.  The gas tax goes and then there would be some negotiation.  We would like to see alternative energy subsidies go too.  At $40 a ton we might be able to eliminate all tariffs but that would require a new administration.  An alternative could be a permanent reduction in FICA taxes so the tax burden for low income folks does not increase.

Why didn’t all the Democrats embrace a carbon tax?  Why weren’t they asked?  And asked to provide specifics?  The answer, as many suspect including Mario Loyola at NRO, seems to be that attacking capitalism is the real goal.  A carbon tax would be part of a capitalistic solution.  It is an idea that conservatives should seriously consider.

Good News, Bad News, Good News

We have been enjoying not being a paid pundit.  Those folks had to watch CNN Climate Change Town Hall.  Did we mention that it was seven hours long?  David Harsanyi at the Federalist has a nice summary: It was insane.  Elsewhere at the Federalist they have created their list of the ten craziest things at the Town Hall.  They didn’t even declare this the winner.   The folks who did that are way, way underpaid.  Then, while we were enjoying our week, Robert Mugabe died.  Our initial reaction way very much like Jim Geraghty: What a joy it is to be able to use the past tense for Robert.

Of course, the bad news is that the folks featured on the Town Hall are running for the Democrat nomination for president in 2020.  The “serious” candidates tend to be the most worked up about climate change.  Here is a tweet from the ten craziest things that ranks the candidates on their climate change proposals:

Tonight’s the . Here’s @greenpeaceusa‘s grades for the participating 2020 candidates.

Bernie Sanders: A
Elizabeth Warren: A-
Cory Booker: A-
Kamala Harris: B+
Joe Biden: B+
Julián Castro: B
Pete Buttigieg: B
Beto O’Rourke: B-
Amy Klobuchar: C+
Andrew Yang: C+

Amy gets a C+ for wanting to spend two to three trillion dollars (and we are certain that all cost figures are wildly understated) on climate change.  To get an average or above grade, as all the leaders in the polls did, you have to spend serious money and have serious infringement of freedom.  Nukes?  No thanks (nice song reference John).

The good news is that Big Oil seems to be ignoring all of this.  Of course, most of the fracking is done by smaller outfits and they don’t need to worry about being woke.

Sidebar: We were trying to confirm the last sentence by searching “Who does fracking?”  Almost all of the responses we got were about the “dangers” of fracking.  We still think Big Oil does not lead the fracking parade.  End Sidebar.

But Big Oil is always worried, watch their ads, about where they stands politically because their size makes them vulnerable.  Yet (from the above link):

Major oil companies have approved $50 billion of projects since last year that will not be economically viable if governments implement the Paris Agreement on climate change, think-tank Carbon Tracker said in a report published on Friday.

This is great news as we don’t need to worry about the frackers.  We shall see what happens.  Will the Town Hall insure another term for The Donald?  Will some Democrat be reasonable and popular?  When?  And why did our paragraph change?

Losing Robert and seeing that Big Oil is not too scared makes it net out to a good week.  We are still worried about climate change policy but are happy that our paragraph form changed back.



How Does Alan Furst Do It?

We try not to harp on the same thing in the same way.  It is hard to do.  We could write on the situation in Venezuela every day.  Speaking of socialism, we saw what looks to be a fun new book.  Switching books, a too brief summary would say that Alan Furst writes the same book every time: Continental Europe just before and sometimes into WWII, somebody always goes to Brasserie Heininger, socialism (both nationalist and Communist) are revealed for what they are, and characters recur.    His site shows 14 books; Wikipedia list four other novels.  We have just finished our tenth, Mission To Paris where Fredric Stahl, our hero, goes to the Brasserie, meets Count Yanos Polanyi and stands at Jean Casson’s office door.  It is wonderful.

So how does Alan do it? How can he make the double digit versions of the same topic perhaps the best of the lot?  We think there are three reasons why Alan is consistently excellent and often exceptional.  First, he has interesting characters and they are often, unlike current fad, folks you like.  Fredric is an appealing hero who is surrounded by interest characters including the aforementioned Count and the Russian movie star/spy Orlova.  We hope we see her again.

Second, he shines a light on different parts of Europe and different parts of the spy game.  In Mission To Paris we see Paris, Berlin, Hungry, and several other countries briefly.  To put it in today’s argot, we see the social media battle as the Germans encourage pacifism in the rest of Europe while preparing for war.  The Germans invite Fredric to a film festival in Berlin.  They have folks that hold parties in Paris.  They try and stop Fredric’s film in Hungry.  And, of course, Alan reminds in the us in the epilogue that they invade and conquer France not long after the book ends.

Third, Alan has great patience as a writer and demands a bit of the reader.  He is patient in developing love affairs and characters.  We get a drop of Orlova and then another drop.  Finally we get some full doses.  We really want to have an Orlova book.

You can start Alan with Mission To Paris.  It is a really great read.  We are on to Midnight In Europe.