A Good Start

We have been hard on the WSJ lately.  Holman Jenkins, jr, one of our favorites, did nothing to help their batting average.  We’ll see if we can get to that later.  Edward Kleinbard has an excellent idea about tax reform that is consistent with our thinking.  You can look it up as we don’t reference ourselves.  Edward reports that a carbon tax of $25 per metric ton would raise $1 trillion over ten years.  He starts with some assertions that are not unreasonable:

To reset the competitiveness of the U.S. tax system, corporate tax reform must be permanent and revenue-neutral. The $1.5 trillion in incremental deficits just approved by the Senate would actually cut into growth, because interest costs on new debt crowd out private investment.

We would add that the reform of corporate taxes (business taxes would be even better) must be large.  He then outlines the positions of the two parties and where the room is for negotiations:

Earlier this year Democratic Sens. Sheldon Whitehouse and Brian Schatz proposed a trade along these lines, but their plan is politically infeasible. They want a carbon tax rate that starts at $49 a ton and ratchets up annually, and their suggested 29% corporate tax rate is unresponsive to the needs of Republicans and many business leaders. This doesn’t mean a deal can’t be reached. The parties need to embrace face-to-face negotiations—not Republican leaders holed up in the White House trying to get corporate tax reform done without a single Democratic vote.

We would also insist on eliminating the gas and diesel tax so that gas is not subject to a double carbon tax. We think $49 per metric ton is high and $25 would be fine but that is the business of politics to negotiate.  A carbon tax of $49 might be sufficient to eliminate the gas tax and corporate tax.  Alternatively, the $49 carbon tax might allow elimination of the gas tax, reducing the corporate rate to 15 percent, and refunding part of social security for low income folks.  Reducing social security would keep the carbon tax from falling too heavily on low-income folks.

We are with Edward.  It is time to negotiate.  Accepting a carbon tax for reduced business taxes seems like a reasonable deal.  You elected officials should be better at negotiation than you have shown so far.


Never Sorry On The Left

Jim Geraghty in The Morning Jolt provides a summary showing how free speech exists for the Left.  He reports:

A lot of right-of-center sports fans don’t particularly like Jamele Hill, the co-host of the 6 p.m. Sportscenter on ESPN, who tweeted Monday that “Donald Trump is a white supremacist who has largely surrounded himself w/ other white supremacists.”
Late last night, she issued the statement: “My comments on Twitter expressed my personal beliefs. My regret is that my comments and the public way I made them painted ESPN in an unfair light. My respect for the company and my colleagues remains unconditional.”

Think about how everyone spent eight years criticizing any mild comment about The Donald’s immediate predecessor.  Mentioning his middle name was verboten.  Now we have The Donald being accused of not just a being racist but a white supremacist surrounded by other white supremacists.  We would like to know who Jamele thinks they are.  Perhaps it is Betsy DeVos who is helping to reinstate due process at colleges for folks accused of rape and provide educational opportunities for inner city children.

Then there is Jamele’s statement.  It sure isn’t an apology.  We’re unsure as to why she thinks they painted ESPN in an unfair light.  She should show her love for ESPN because they didn’t fire her.  We don’t want Jamele fired but we didn’t want Curt Schilling fired either.  After that ESPN said:

ESPN is an inclusive company,” ESPN said in a statement. “Curt Schilling has been advised that his conduct was unacceptable and his employment with ESPN has been terminated.”

ESPN can fire folks as they see fit.  We don’t want to boycott them but their programming is less interesting lately so we watch less of it and rarely visit their website.  We would like them and the press to have some consistency in these situations but that isn’t going to happen.  Jamele deserves the same as Curt under ESPN’s criteria.  We don’t have a solution but it is easy to see why they are in financial trouble and perhaps the market will provide that solution.  Insulting half your audience is never a good idea for a mass marketer.  Doing it at a time when it is easy to cut the cord seems like bad business.  It will take the market awhile but ESPN and Disney will get a response for their behavior.  We do love markets.

Facebook Foolishness

We woke up this morning and checked our Facebook feed. The percentage of nasty was especially high out there today.

Being nasty to conservatives:

Bret Stephen is one of the NY Times’s conservative columnists, but he sure gets it.  [Here is a better link to Bret.]

Supporting beauty pageants twice:

Miss America 2018 makes history: She says the US withdrawal from the Paris accords was a bad decision.
Miss Texas tears into Trump in a blistering 15-second takedown on live TV.
[We are old enough to remember when the left didn’t like beauty pageants.]

Being nasty to FoxNews:

Weatherman interviews random person, turns out he’s the smartest person to ever be on FoxNews.  [We suppose these folks watch FoxNews so much that they would know.]

And it is the morning of 9/11.  To be fair there was one post on 9/11 expressing love to the survivors and another by a Congressman supporting Kate’s law.  Neither were nasty.  It continues to escape us why many folks think conservatives are mean.




How Times Have Changed

In the WSJ there was the expected editorial from an unexpected source.  This is how Laura Tyson started off:

Corporate tax reform is one of the few issues that attract bipartisan support in Washington. Lawmakers from both sides agree that the current system is deeply flawed. Because the U.S. hasn’t updated its tax code in 31 years, Congress has a once-in-a-generation opportunity to level the playing field for American businesses and workers.

We have not detected as much agreement or enthusiasm from the Democrats as Laura suggests.  We are not even sure about the Republicans.  So who is Laura?  The brief bio at the bottom tells us.

Ms. Tyson is a distinguished professor of the Graduate School at the University of California and serves as an economic adviser to the Alliance for Competitive Taxation. She headed the Council of Economic Advisers and the National Economic Council during the Clinton administration.

We hope she knows something we don’t.  It would be great to see a bipartisan bill to reduce business taxes and specifically corporate rates.

Laura advises the Alliance for Competitive Taxation (ACT) which describes itself as a coalition of leading American businesses.  Most of us remember the Clinton administration.  We don’t remember Laura.  Perhaps we should have.  Here is an ACT summary:

Specifically, the coalition [ACT] believes a globally competitive tax system [for the US] would include:

  • A 20% or lower federal corporate tax rate.

  • A modern territorial tax system aligned with all other G7 countries.

  • A tax base that defines income in a manner similar to other “best in class” tax systems and allows a full deduction for ordinary and necessary business expenses. Limitations on interest expense, for example, should follow the international norm of “thin cap” rules rather than an across-the-board disallowance.

MWG can support this.  We have explicitly supported the first two bullets but we don’t link to previous posts.  The third bullet is implied as we have not argued for eliminating the interest deduction.  Can Laura or anyone get bipartisan support for this?  Can she run for president as a Democrat?  As she is at the University of California, could she replace Dianne Feinstein in 2018?

It is a sign of the times that Laura was part of a Democratic administration last century.  We hope she, or somebody like her, will be invited to the next Democratic administration.  It doesn’t seem likely today but JFK was a Democrat.  Jimmy Carter was often serious about economics, especially deregulation.  Bill Clinton, Laura’s boss, had his economic moments.  Things change.  They may change back.

The Donald And DACA

The Donald plans to end his immediate predecessor’s (HIP) Deferred Action For Childhood Arrivals (DACA) policy in six months.  It is estimated to affect about 800,000 illegal aliens.  The action by HIP was widely recognized as unconstitutional so The Donald’s wisdom in this action seems obvious.  The crazy reaction it has led to is amazing.  Here was one on my Facebook feed:

Trump needs to be deported–not these aspiring young people. What a CREEP he is!!! And certainly delusional too–as Andy Borowitz so aptly summarizes in this article.  (God help this country with this wacky, cruel, traitor for a president.)

We see there is no evidence that these folks are aspiring.  We see no evidence that they will add to anything other than Democratic vote totals.  We checked out Andy at the New Yorker.  It says it is satire from the Borowitz Report and here is a sample:

“Under this new decision, if you have worked hard, gone to school, and contributed to the country, you face immediate deportation,” one legal expert said. “On the other hand, if you can prove that you have a glaring personality disorder and a flimsy grasp on reality, you can decide the fate of those other people.” [Quotes in original]

It is possible that Andy is making fun of the legal expert but it doesn’t seem like it.  There are six months for Congress to act as only Congress should.  If they don’t act it is unlikely that any large percentage of these illegal aliens will be deported.

The WSJ isn’t much better.  We know that they are open boarders advocates but they should have more respect for the rule of law even when it is the immigration law.  The editors start the second paragraph with:

[The Donald] was at his worst during the campaign when he assailed DACA as an “unconstitutional executive amnesty,” though to his credit he later evinced a change of heart toward these immigrants who were brought to the U.S. illegally as children.

Why was this The Donald at his worst?  It is not quite clear but a couple of paragraphs later they admit:

But as a legal matter, they are right that Mr. Obama’s DACA diktat presents legal problems. The Constitution gives Congress the power to write immigration law, and issuing work permits confers a right that is the purview of the legislative branch.

So the WSJ agrees that The Donald and most everyone else is right that HIP’s action was unconstitutional.  The Donald give Congress time to act.  We hope they find some common ground to improve immigration policy and that the executive branch enforces that law.  The Congress needs to find a way to compromise.  It would help the Congress develop some backbone if folks responded more reasonably to events.

A Different Profile

We were going to avoid commenting on Catherine Rampell’s silly attempt to smear the Republican Party.  We didn’t think she was worth our time but after reading and commenting on Aaron Hedlund’s serious piece in the NRO we felt we had to make a comparison.  Aaron was taking a risk with his career to start a serious discussion.  We are not sure what Catherine was doing or why she was doing it.  Here is how she starts off:

Republicans have one idea and one idea only: That we should cut taxes for the rich. The only thing that changes is the sales pitch.

Goodness!  That is the whole first paragraph.   Catherine writes for the Washington Post which is often thought to be a serious outlet for news and opinion.  The HardingKennedy (he is an honorary Republican now), Reagan, and Bush tax cuts were across the board.  The Romney tax cuts would have been across the board too if we has the sense to elect Mitt.

Most of the interest this time around, however, is on reducing business (including corporate) taxes.  So after smearing The Donald, The Donald Jr., Betsy DeVos, and Jared Kushner she says:

A slightly different trickle-down pitch (one Romney, House Speaker Paul D. Ryan, and other prominent Republicans have also made) has to do with capital formation.

If corporate income taxes and capital gains taxes fell, then shareholders would get to keep a higher portion of corporate profits. That means investors might be willing to offer more capital to businesses, and thereby help them expand — which could grow jobs and wages.

Ah, start the old trickle-down lie.  Thomas Sowell takes this caricature to task in depth.  Here is part of his conclusion:

To the extent that the American economy has changed since the time of Andrew Mellon, it has changed in ways that make it even easier for wealthy investors to escape high tax rates. A globalized economy makes overseas investments a readily available alternative to buying taxexempt bonds domestically. Even if the domestic tax rate is not “high” by historic standards, what matters now is whether it is high compared to tax rates in other countries to which large sums of money can be readily sent electronically. Meanwhile, unemployed workers cannot nearly so readily relocate to other countries to take the jobs created there by American investments fleeing higher tax rates at home.

Of course, Catherine and rest of the left wants laws to prevent the flight of capital and organizations from the US.  She is also implying that corporate taxes fall entirely on shareholders.  There are two problems with this.  First, shareholders are widely dispersed.  Secondly, and more importantly, it is unlikely that corporate taxes fall entirely on shareholders.  Here is what the CBO found:

Even though the majority of the studies conclude that labor bears a substantial burden of the corporate tax, the various methodological limitations put the reliability of those specific estimates into question. Indeed, trying to address the long-run incidence of general corporate income tax is a daunting task, and these studies have made attempts at using the data available to provide insight into that question. However, it remains unclear where incidence will fall in an open economy. [Emphasis added]

To summarize, the notoriously right-wing CBO (satire alert!) found that research generally showed that labor bears a substantial burden of the corporate tax but it can’t be certain that the research is right.  We wonder how they do their projections if it is (and it is) unclear when will happen in an open economy.  Reducing corporate taxes is likely to improve corporate decision making and it is also likely to help labor.

Robert Verbruggen notes that economists disagree (a shock!) on how to increase wages.  One way that has substantial but not complete support from economists would be to reduce corporate taxes.

Catherine’s piece is very different from Aaron’s.  Aaron has made his arguments and stuck his neck out.  Catherine has just told us she doesn’t like Republicans and really dislikes The Donald and his associates.   She has offered amazingly little other than reciting some dubious mantras of the left.  They do, however, have one similar shortcoming.  Neither has suggested a willingness to compromise.  We think there needs to be a compromise to make a breakthrough.  Many are possible but here is our suggestion: reduce the corporate rate to 15 percent, eliminate the federal gas tax, and enact a carbon tax equal to or even slightly above the current gas tax.  It is a deal that gives something to the climate folks, the deficit hawks, economic conservatives. Each group loses something as well but you can’t trade Don Buddin for Mickey Mantle.  It is time for political folks to do political stuff.



No And Yes

This appeared on our Facebook feed recently:

Everyone OK with using socialism to clean up after Harvey?  Or should we use the free market.  Just asking for a friend.

The obvious answers are no to the first question and yes to the second.  Here is the funny thing: The quote comes from the US Democratic Socialists page!  Does anyone really think that socialism is effective or could be effective with these kinds of problems?  The WSJ has a nice story on self-organized volunteers.  Does anyone think that capitalism or free markets will not be effective?  We are sure that Mark Perry has something on how folks will try to blunt the market’s ability to get the necessary items to Texas by fixing prices.  Ah, here is one.  If you want effective solutions you need markets.

Or is it that the socialists what Texas to suffer?