The Mountaintop At APT

American Players Theatre in Spring Green, WI has live theatre back in a little way. It is great that we got to see The Mountaintop live but we were in The Touchstone, the enclosed theater at APT, where only about 60 people (It is hard to count in the dark) of the possible 200+ seats were filled because of COVID restrictions. And, yes, we were still required to wear masks on Memorial Day weekend. As we understand it, most of the restrictions come from the actors union rather than the state. We hope APT will open in its full glory in the near future.

The Mountaintop is about the last evening Martin Luther King, jr’s life. It is a two character play with Gavin Lawrence as MLK and newcomer to APT Sola Thompson as Camae, the hotel maid that turns out to be someone else. The performances are excellent. The first part of the play that emphasizes MLK’s weakness for cigarettes, alcohol, and women seems cruel given what we know will happen. But that should teach a critical lesson for today: you don’t have to be perfect to be right about a cause. Depending upon your outlook even The Donald can be right or wrong. Still, we had got the message about MLK’s shortcomings. There were other issues to discuss.

We would have liked to see MLK comment on current events like George Floyd and Black Lives Matter (BLM). Camae could have gone BLM instead of Malcolm X and MLK could comment. The pillow fight between MLK and Camae seemed like a distraction. The feathers that floated around and landed on the actors surely were.

What is important to remember from Dr King’s life and recent circumstances is that there are no won causes or lost causes. MLK’s leadership and death “won” the cause of racial equality for awhile. Fifty years later we have BLM, the director of the show wanting to work for equity rather than equality, and our president calling a reasonable voting bill “Jim Crow on steroids”. It would seem that the cause of racial equality once again lost.

The cause of racial equality wasn’t lost during Jim Crow or won by MLK or lost by BLM. “All men are created equal” is a recent idea in human history. It is a great goal but a challenging one to approach. Go to The Mountaintop at American Players Theatre to remind yourself of both the greatness of the goal and the challenges to approach it.

Combining Micro And Macro Observations

Today boys and girls we are going to combine a visit from our local Congress critter and the Secretary of Labor with a trip to the grocery store and an NRO article by Kevin D. Williamson. Our local critter, Ron Kind, and Secretary Marty Walsh were in town to push The Frontrunner’s American Jobs Plan. The local paper was very supportive as one would expect and told us:

The duo pitched the plan to area leaders, as [The Frontrunner] and his team work to negotiate across the aisle to pass his ambitious economic package that covers infrastructure, broadband, long-term care facilities, climate change and more with a focus on job growth.

Western Wisconsin seems like an odd place to push this. The next day or so we took a trip to the grocery store to give us a micro view of why such extraordinary measures don’t make sense here. It is about a 20 minute ride through a mostly residential area. The first notable thing is a sign to a free bus ride to interview at a manufacturing facility forty-four miles away. Then on SiriusXM there are two ads recruiting truck drivers. Truck drivers can make good money! This is a little more macro because SiriusXM covers all of North America and we are not sure if it was the same ad twice or two different companies. Over the last few months we have heard at least four different companies advertising for truck drivers. Truckers must like soccer talk radio. Then there were all the help wanted signs as we entered the retail area. Everyone, it seemed, including the grocery store was looking for help. There were also two billboards advertising help wanted. Paying attention on our little drive convinced us that the shortage is job seekers rather than jobs. Or to put another way, it is a workforce-participation issue.

Sidebar: What about “good” jobs you ask? It is only a smidgen of an exaggeration to say that there are no bad jobs. Individuals have career cycles. We held a wide variety of dirty, hard, and odd hour jobs during our life. We cycled out of that via education but everyone has different interests and luck. A job helps you build human capital. If we denigrate or price control those jobs that are often entry level then many individuals will fail to build the human capital necessary to succeed. End sidebar.

Kevin D. gives us the macro view in the aptly named Phantom Economic Crisis at NRO. Yes, of course, you should read all of it and everything Kevin D. writes. Kevin D. starts out:

Washington is in an awkward period for good economic news — too late for [The Donald] to claim credit, too early for [The Frontrunner] to.

One of the rhetoric pieces we want to get around to is Kevin D. and The Donald but here we will just note that it is clear to us that that the good economic news does belong to The Donald and not The Frontrunner. But the important fact for today is the good macro economic news that Kevin D. summarizes:

New unemployment claims have just hit another COVID-era low, GDP growth in the first quarter was a robust 6.4 percent, and the growth in wages in that quarter was the best it has been in 20 years or more. There are some areas of concern, of course — worrisome inflation indicators, record public debt, and a workforce-participation rate that is stuck where it was last summer — but, given all that has happened, things look not at all bad — the American economy in the age of globalization has proved more resilient than many had thought.

The macro and micro news should convince us that it is not the time for anything like the oddly titled American Jobs Plan. Kevin D. tells us about two of the Democrat governors supporting the American Jobs Plan:

Governors Tony Evers of Wisconsin and Gretchen Whitmer of Michigan demand Washington-led “transformational change” of the U.S. economy, while Biden still talks about “putting America back to work” as though we were in the depths of the Great Depression. We aren’t — we aren’t even close. We aren’t even in a recession.

We have elected The Frontrunner, The Suit, and The Wicked Witch of the East so we deserve the blame. Kevin D. is exactly right when he concludes:

The crisis mentality is an excuse to spend big now and then get gone before the bill arrives. There was an economic crisis associated with the coronavirus epidemic. We got through it pretty well. It’s over now.

He might have added “thanks to The Donald” after pretty well but it is a rhetoric thing. As Kevin D. says we do need to be worried about inflation, public debt and the deficit and workforce-participation. The American Jobs Plan that Ron, Marty, The Frontrunner, The Suit, and the Wicked Witch of the East are pushing will not help any of those. We wish the GOP had a sound alternative.

Joy In Gdansk

Sometimes it is the Iran-Iraq War where you really want both sides to lose but the Europa League final in Gdansk between Manchester United and Villarreal gave us a clear choice. Despite the fact that Unai Emery was a coaching disaster at our team, Arsenal, and beat them in the semi-final we clearly preferred his team, Villarreal, to Manchester United. Why? Because Man U is from, well, Manchester and we don’t like the one in England. We are fine with Manchester VT and NH and several others in the States but not the original.

Add to that the Spanish side was a substantial underdog and the kneeling (Man U) and not kneeling (Villarreal) and it is a pretty easy choice for us. The game was not very interesting, one goal each in the regular 90 minutes plus 30 minutes of overtime. The shootout after that was epic as the first 21 players converted from the spot. This alerts us to statistics and a goat.

In sports there is a G.O.A.T. (greatest of all time) and a goat, the guy who gets blamed for the loss like Bill Buckner in 1986 World Series. The goat in the 2021 Europa League final is David De Gea, the goalie for Man U. Not only did he fail to stop any of Villarreal’s 11 spot kicks, his spot kick was stopped as Man U lost the shootout 11-10.

We were listening to the game on radio and they told us the Man U’s Bruno Fernandes is an excellent penalty taker because he converts 85 percent of the time from the spot. According to this report, 75 percent is the average. Most or all of that percentage, however, is when the team chooses the player. If Bruno is making 85 and the average is 75 then some of the team’s best are doing less than 75 and players who are not the best would be expected to make less, perhaps far less. We decided to use 65 percent as an average for all ten players.

Sidebar: We would expect the percentages in spot kicks after 120 minutes of soccer to be lower than the average for penalty kicks because the other players are tired because they run much more than the goalie. One thing that happened is that both teams made substitutions near the end of the game with an eye to a shootout. End Sidebar.

Based on our estimate then there is just over a one percent chance of all ten players converting from the spot IF the events are independent.

Our conclusion is that they are not independent events. If the first player convents then it becomes more likely that the second player will convert. Also, in the shootout, the goalie plays every play and gets physically beat up and mentally beat down by each conversion.

Now if the other Manchester team can lose on Saturday it will be a special week.

Rhetoric And Classifications

Rhetoric is the art of persuasion. We’ve noticed some great examples and hope to get a few posts out of them. We start with Alexander William Salter of Texas Tech writing on “Common Good” Conservatism’s Catholic Roots in the WSJ. Yes you should read it all now. And then read it again after you come back and read MWG.

Alexander starts out with a really interesting first paragraph:

It’s no secret that U.S. conservatives and big business are falling out. Skepticism on the right toward corporations is at an all-time high. Many within the GOP regard woke capital as the greatest threat to American liberties. In fact, conservatives are rethinking the social role of markets in general. If free enterprise has lost the power to inspire the U.S. right, what’s the alternative? [Emphasis Added]

To help the reader we have made bold the five (US conservatives, the right, GOP, conservatives, and US right) different groups that Alexander is trying to conflate into one. To consider only the three in the US, they have Venn diagrams that overlap but, if conservative has real meaning, they are very different.

Conservatives are a small part of the right and not necessarily part of the GOP. The Donald is currently part of the right and was formerly the leader of the GOP but he is not a conservative. The GOP is a group you can join or leave that is trying to win elections, the right is a very broad category while conservatives work with ideas from a fairly common set of principles. Many conservatives left the GOP over The Donald. Others, like us, never joined. Conservatives are, on a checklist basis, fairly similar. Conservatives, however, vary in focus (e.g., freedom of speech, guns, abortion) so we say that those that focus on capitalism, we call ourselves capitalist orphans, are the smallest of splinters.

Sidebar: Speaking of rhetoric and persuasion, did you see what we did there? We didn’t get into the weeds on defining exactly what is a conservative, the right, and GOP so you wouldn’t get distracted and disagree with us on the irrelevant detail. Of course, there are a few folks that will take umbrage at us saying The Donald isn’t a conservative. We agree that The Donald took some conservative actions during his presidency but that is quite different from being a conservative. End Sidebar.

If Alexander is talking about capitalistic orphans then he first sentence is absolutely wrong. We supporters of capitalism are not supporters of any particular kind of business. There is no relationship to fall out of. Capitalistic orphans are supporters of consumers.

As we see it, individuals in the GOP, like The Donald and Marco Rubio, have advocated policies that are pro or anti certain types of businesses. It is bad economics but it might be popular. It means that us economic orphans are really homeless since the Democrat Party will give us no succor.

Weather Channel And Air Quality Index

We really enjoyed our trip to China in 2018. We had several post about the joys and some of the challenges of an English speaker from the US traveling in China. One of the challenges is pollution in cities. We said this on 12/27/18:

Pollution is a significant issue in China.  In Beijing, Changsha, Xian, and Chengdu it was a concern.  We use the Weather Channel app and it gives warnings like the one for Xi’an today: “Unhealthy Air Quality for Sensitive Groups.”  We think there is a more severe warning too.  If you are thinking of going to China we would suggest you monitor the cities you might visit so you know what to expect.  Our observation, from a small sample, was that Dali and Lijiang did not have the problems the others did.

Then, just five weeks later, we sent the following email to a fellow scribe after the Weather Channel eliminated the Air Quality Index (AQI) reports and warnings:

I use the Weather Channel app to get weather information including Air Quality Index (AQI).  Several of my tabs in the app are Chinese cities.    I mentioned the AQI issues in my blog (menwithgloves). Very recently all of the Chinese cities, even the ones with good AQI, stopped reporting it. The US cities still report AQI. I’d like to know if Chinese pressure caused this change.  Wouldn’t you?

Sidebar: Why do we have two document references above? Because, as we often tell you, human memory is not reliable, especially over long periods. As evidence, we thought the email was a blog post and spent significant time trying to find it. End Sidebar.

We don’t know when the AQI reports started again from China but they were there today. China was the only country (we have US, ENG, NZ, and AUS too) where the AQI reports were moved up the screen so you would see them at first glance without scrolling down. Changsha (AQI = 33) was excellent while Xian (51) and Chengdu (77) were good. By way of comparison, Boston (52) was moderate and the Boston page showed AQI (US) while the Chinese reports just showed AQI. The fact that Boston gets a different description, moderate, for a numerical score that is between the two Chinese cities that are both described as good suggests that the Chinese are using a different AQI. It might be something or it might be nothing but we need an intrepid reporter to investigate. If you are traveling to China you need to do some research.

Fix The Tax Code; Don’t Expand The IRS

Last month we supported Kevin D. Williamson in opposing the big expansion of funding for the IRS. The NRO has decided to use a tax speicalist, Daniel J. Pilla to back up its big gun. You should read Daniel’s post in its entirety because he has some great details along with a great conclusion:

The single most important thing Congress can do to have a positive effect on compliance is to radically simplify the tax code. No, I don’t mean more tinkering around the edges such as we’ve seen for the past 25 years. It is time we come to grips with the reality that the current system is broken well beyond repair. It is time to bulldoze the graduated-income-tax system and start over with something that is truly simple, fair, and efficient.

It is a very interesting conclusion since Daniel is a tax litigation specialist who, obviously, benefits financially from the complexity of the tax code. We would like to emphasize one point Daniel makes and add one of our own. The tax code is complex and Daniel reminds us that taxpayers are not the only humans to fail to understand it:

The problem with using NRP audit results to build the DIF database is that, as I document in my book How to Win Your Tax Audit, the IRS’s audit results are incorrect between 60 and 90 percent of the time (depending on the issue). This high error rate has a number of causes, not least of which is that tax examiners use tactics of bluff and intimidation, misinformation, and disinformation when talking to taxpayers about the law and their rights. This causes citizens to accept audit results that are inaccurate and should be challenged but typically are not.

One likely outcome of the increase in IRS funding is lots of litigation on big-ticket items. The IRS will lose some of those and keep folks like Daniel very well off financially. It also means lots of stress for folks. The tax guy at our school was the most conscientious and risk-averse person we have ever met. He got a gig with an accounting firm one semester and because he had to live away from home he had enormous deductions that triggered an audit. Bad move by the IRS. They spent lots of hours on it and ended up giving him a check at the end.

We have our own story about IRS tactics. For many years now you need to include Social Security numbers for children and other dependents on your tax return. It is a good idea but one year we transposed the digits for one child. Since the IRS had our previous returns with the children’s Social Security numbers in the right order it should have been a minor problem at most. Instead, we got a letter requiring that we send them birth certificates and other documentation to prove the existence of BOTH children. It was a silly waste of our time caused by IRS tactics.

Our concern is the related one that the IRS is going to have to justify the funding increase. That means more audits producing more tax revenue. The obvious places to us are the gig economy, underground economy, and workers with tips. Students often asked us how much of their tips they needed to declare and were always disappointed with our answer, “All of them.” We don’t have any data but our observations lead us to conclude that there are lots of folks that are not rich that are actually cheating on their taxes or just blissfully unaware of the tax code. We don’t see this level of tax enforcement as a useful thing.

Daniel is right that it would be great to radically simplify the tax code. Here is a great start. We, however, would be delighted with any simplification during The Frontrunner era. We like increasing the standard deduction.

Tariffs Are A Poor Tax Choice

The editors of the WSJ are on the case of The Donald’s steel tariffs. Tariffs are a bad idea because they are a regressive tax that harms many consumers while sometimes helping a few workers or stockholders. In our global supply chains the tariffs can do damage to many businesses and often lead to retaliation that amplifies the losses from tariffs.

Sidebar: Tariff retaliation seems really silly. Country A: We are going to harm our citizens by raising taxes! Country B: You can’t do that. We will harm our citizens too! End Sidebar.

Of course you shouldered the whole thing but there is a paywall so here is a taste starting with the supply chain problems:

The evidence is overwhelming that Donald Trump’s tariffs have benefited the few to the detriment of the many. Consider the roughly 300 American manufacturers that wrote to Mr. Biden this month, protesting scarce metal materials and unsustainable prices.

As we said, read it all so you can get the joy of the few, the misery of the many, and retaliation by other countries exacerbating the first set of problems. Here are a few details we like:

Another tariff analysis said that each new steel job cost consumers $900,000. Tariffs begat tariffs, as Mr. Trump tried to prop up steel makers further by levying (unlawfully, a court later said) additional taxes on metal imports like nails. Companies that couldn’t reorganize their supply chains, maybe because they needed specialized parts not available in the U.S., had to go begging—and politicking—for tariff exclusions from Washington.

We are not big fans of higher taxes, but, if you are going to do it then make it broad based like VAT, income, or a carbon tax. Alternatively you can do away with specialized “incentives” like interest on homes. Let’s see if we can make our tax code make sense. We know it seems unlikely given The Frontrunner and his friends because they share many of The Donald’s worst policies.

Liz II: After The Donald

We were pleased to see that Jonah Goldberg agreed with us on terminology for the defenestration of Liz Chaney but as for the rest of it any time Jonah gets on The Donald we really get distracted so you don’t need a link. More interesting is Andrew McCarthy’s take at NRO. Did you know there is another with the same moniker? We largely agree with Andrew and, of course, you should read the whole thing. Be aware that Andrew almost always goes the extra mile or at least a couple extra paragraphs in his columns.

We do have one area to discuss with Andrew about Liz’s behavior. He says:

Then again, there is more than one way to go about this. Cheney has been headstrong: The party must go cold turkey rather than being weaned off of Trump. She’s wrong about that. She’s also being impractical. It is simply a fact that a significant plurality of the GOP base remains infatuated with the former president. This is going to take time. There is no upside in bringing up the former president and the 2020 election brouhaha at every turn. [Emphasis Added]

We are not sure about cold turkey versus weaning is the best way to leave The Donald behind. What we are sure about is that Liz is developing her brand. She, unlike her replacement Elise, is branding herself as a leader of the conservatives. We need more folks like Liz.

Wisdom For The Ages

In the second paragraph of a recent editorial the WSJ editors impart this wisdom:

Economists aren’t the best at predicting how markets or technologies will evolve, but politicians are worse. 

They are discussing the ethanol mandate that the sainted W cooked up almost two decades ago. We don’t know why they singled out economists because it is the politicians in every administration and almost every county that think they know best. They, as the editors rightly point out, have a very weak record.

Since ethanol mandate we have had corn shortages and while oil and gas have become bountiful. You should read it all but you should really focus on the idea: don’t let politicians or anyone try to pick winners a few decades from now unless they are putting up their own money.

The problem is that governments are inflexible. Part of the inflexibility comes from laws passed. The Donald had his own problems with picking winners but he wisely tried to help with the ethanol mandate but the courts rightly stopped him:

the Trump EPA granted some small refineries “hardship” waivers from their quotas, only to be sued by the ethanol lobby. The Tenth Circuit Court of Appeals invalidated the waivers in January 2020.

As any capitalistic orphan can tell you: markets are the flexible solution to economic questions. Let them work.

Tax Fringe Benefits!

Kevin D. Williamson at NRO has a great article on paternalism, the company town, and convergence of politics of the left and right in The Corporation, In Loco Parentis. You should read it all but we would like to use a small part of it to go off on a slightly different but related track. Kevin is absolutely right when he has this to say about employers paying for employee’s health insurance:

But there are downsides to corporate paternalism, too. To take one obvious but head-clutchingly difficult example, think of all the economic distortions, family anxiety, and political mischief that have been wrought over the years by employer-based health insurance, which has made American businesses the mediators between patients and doctors for about half the country. It will not come as a surprise to any employed person that an employer has economic incentives that are not identical to those of its employees, and that these incentives sometimes are even rivalrous, meaning that some of your most critical personal decisions are conditioned by a third party that does not have your best interests at heart but upon which you are dependent, often in multiple complex ways. Rather than working to liberate ourselves from such enmeshments, we more often are compelled by our risk-aversion to seek deeper and broader entanglements, or at least to accept such entanglements as an inescapable fact of life as it is now lived.

We hope we got the apostrophes right to keep Kevin happy because when he heard the Apostrophe Protection Society shut down and the barbarians had won he said:

No, they haven’t. As another Englishman who cherished the language said: We shall never surrender.

Kevin already had a long article so he didn’t have time to get into the tax policy issue. The problem is not that employers offer to pay for health insurance. The problem is that despite the general rule of taxing all income from what ever source derived, fringe benefits, and most importantly health insurance, is not considered taxable income by the IRS Code.

Making health insurance tax free income for employees creates incentives for everyone to want it and everyone to want more. Here is a report that just under half or 156 million Americans get their insurance from their employers. Of course, many of the folks getting insurance are part of the family rather than the employee. There are two enormous problems with the current situation.

First, the incentives are wrong. Everybody want tax free income so there is pressure to create what is often referred to as Cadillac plans. Health insurance now often covers almost every medical related expense folks can think of. Health care and all the related services become free and consumers don’t care about the prices which means there is no market for health care services. There is also the problems that Kevin is worried about such as you can’t afford to leave your employer.

Second, there is the governmental revenue problem. Folks who are still faculty members have grad students to gather the data so we will do back of the envelope computation. Let’s say that 50 million American employees get “free” health insurance and other benefits and those benefits are worth $20,000 each. Our health care benefits provided by our employer were over $20,000 annually when we retired six years ago. In addition we get about $10,000 in health care benefits AFTER retirement.

So our rough estimate is $1 trillion in untaxed income and could be taxed for both income and FICA. Figure, again in rough numbers, 15 percent for federal income tax and 15 percent for FICA which gives you $300 billion a year. Again, we need somebody to run all the details but this would be an enormous step in fixing entitlements and getting the rest of the federal government closer to balance. Of course, behavior will change if benefits became taxable but that would be a good thing.

We know it is not going to fly because taxing 50 million families an additional $6,000 is not going to win votes. We would like to think that there is somebody that could create a system so that it was closer to revenue neutral by taxing all income (and yes we would include our post-employment benefits) and reducing rates to improve the system. Unfortunately, that is a big ask of our political class.