A Ray Of Sunshine

We are depressed with The Donald raising taxes (tariffs – Hokey smokes, Pete is right) on Americans to show the Chinese.  We are with the editors at NRO:

Trump responded to the setback in talks by raising tariffs, and China reciprocated. The escalation of the trade war poses increasing risk to our economy, as stocks have been signaling. The best course for the U.S. now would be to reach a swift resolution in the current talks — getting back to the deal that seemed to be on the table before China miscalculated — and then switch to a strategy for changing Chinese behavior that does not depend so thoroughly on possibly backfiring tariffs.

Meanwhile, here was a ray of sunshine from Mark Perry at Carpe Diem:

RelatedCNBC reported today that “Walmart’s U.S. store managers earn an average of $175,000 per year and receive benefits including parental leave, health benefits and 401(k) contributions. That’s higher than the average salary of some of the country’s best paying jobs, including dentists, who make an average $174,110 a year, according to U.S. News & World Report, and lawyers, who make an average of $141,890.”

Who-d a-Thunk It? Walmart managers make more than dentists and lawyers on average? And I’d bet [we were sure before the update] many of them started as hourly associates and worked their way up to store manager…. but, but, but I always heard those retail jobs at Walmart were dead end jobs….??

Update: According to Walmart “75% of its Walmart U.S. store operations management team members started as hourly employees.”

It is the natural financial life cycle of humans in our age of abundance.  Folks build skills while working low paid (and often menial) jobs and fighting financial challenges while they are young.  They use these skills to manage their finances and build a career.  There are lots of individual exceptions.  Some folks like Bill Gates go for it and make it big early.  Other folks go for it and fail.  Check out the restaurant turnover in your hometown.  Some folks fail to build skills because of chemical dependency or other issues. Still it is what most people do and a good plan for most folks.

This is why increasing the minimum wage is such an insidious idea.  It doesn’t just throw people out of work but it can ruin their lives.  The ray of sunshine from Mark reminds how well the natural financial cycle does work.



Bigger Fool Theory

Paul Mirengoff over at Powerline is discussing the dance of The Donald and the Chinese over tariffs.  It appears that The Donald is going to slap a substantial tariff on Chinese goods coming into the US.  We are not convinced by Paul’s arguments but read it all and see what you think.  We are most concerned when Paul says:

China is notorious for its bad faith in international relations, so we shouldn’t be surprised that it apparently has reneged on commitments made during negotiations. The proper response is to do exactly what Trump plans to do — inflict more pain on China. [Emphasis added.]

We are OK with the first two sentences but not the third.  As we have said, we don’t like being The Donald’s human shields.  Paul is wrong because The Donald is not inflicting pain on China.  He is inflicting pain on us by raising the prices we pay.

Now it is possible that there are rational rationales for The Donald’s behavior.  First, it might play well in his upcoming election.  Second, it might be a good negotiating strategy for both this round of talks and upcoming issues with the Chinese.  There are sure to be some of those.  Third, it will provide a little revenue to finance the government.  The first is surely a version of the bigger fool theory.  The third is a variant of it.  The Donald implements a regressive tax (tariffs) and the folks taxed love it.  We hope the second is the reason but we are not convinced.

Shoot The ******

We need Mel Brooks.  He would have the Donald and Xi each holding himself at gunpoint and, like Cleavon Little in Blazing Saddles, threatening to shoot themselves and using some racist name to make it even more silly.  Kevin D. Williamson is on it at NRO and Mark Perry is all over it at Carpe Diem but we really need Mel because this situation needs humor rather than logic.

It is too silly.  The Chinese harm their folks by raising taxes and raising prices for their citizens.  The Donald says he will harm Americans [we don’t really understand why] perhaps to get even with the Chinese for harming their people.

Sidebar: One almost rational rationale is that The Donald is using bluster to negotiate.  The problem is: what is he negotiating?  He is trying to get the Chinese to lower their taxes and help out the Chinese.  That is nice but we don’t like being a human shield.  End Sidebar.

The Marx Brothers were good on this topic but Mel would be great. Unfortunately if The Donald raises our taxes (tariffs) then as Mel has Slim Pickens say, “We’re gonna need a sh*tload of dimes.”

So Sensible It Is Likely To Be Unpopular

We see from the WSJ that the Democrats and The Donald are conspiring to spend lots of money, two trillion, on infrastructure.  The WSJ says:

Democrats disagree internally on how to generate revenue for an infrastructure plan. Mr. Schumer won’t consider a proposal to raise the gas tax, unless Mr. Trump agrees to undo some of the 2017 tax cuts, a person close to the minority leader said. Mr. Schumer, along with several other Democrats, say a gas tax disproportionately hurts poor and working-class people.

We are not necessarily opposed to infrastructure spending.  It depends upon what it is spent for, how it is financed, and what the deal is.  We have advice for The Donald, Chuck, and Nancy.  Unfortunately, it makes so much sense that it will be unpopular.

Here is our proposal. You can guess the financing part: Eliminate the gas tax and implement a carbon tax that keeps the price of gas constant.  Spend the surplus.  Permanently eliminate the Jones Act and all other restrictions (like requiring union workers or American made stuff) that increase the cost of infrastructure to taxpayers.  There are lots of other details like how to allocate the spending among states and types of projects.  Those need to be attended to as well.  The deal should be almost entirely about auto/truck travel.

A Second Thought On Carbon Tax

We were considering what we said about carbon taxes and Marlo’s No True Conservative.  We are also aghast that we misread his name.  We offer our sincerest apologies for the error.

Our second thought is about markets.  Both Marlo and MWG are friends of markets.  We think that the current price of carbon products plus a modest carbon tax is a better market price.  That is, the additional cost of using carbon that is not reflected in the market price is at least half of a modest carbon tax.  Since we are eliminating the gas tax we need to pay for roads out of that amount too.

It is a subject of controversy and there is a need for research but we think a modest carbon tax makes for a better market price.  So would the elimination of subsidies for “alternative” energy sources.

No True Conservative

When James Taranto did Best Of The Web on the WSJ one of his favorite logical fallacies was “no true Scotsman.”  We are not sure if James Freeman has continued the tradition or not.  Mario Lewis, jr. at the Competitive Enterprise Institute must not be a Taranto fan because his conclusion about enacting a carbon tax is that:

It’s irresponsible to provide bipartisan cover for one-sided assessments that hype climate change risk and deny climate policy risk. No true conservative will do it. [Emphasis added]

Since we are on the record as favoring a modest carbon tax under certain conditions and we don’t like being cast out of the conservative tent we read Mario with interest.  We also checked out Another Carbon Tax Defeat at the WSJ that reports on the provincial election in Alberta Canada where the conservatives opposed to the carbon tax instituted by their predecessors won 63 seats compared to 24 for the leftists.  The WSJ lists additional failures of the carbon tax at the ballot box:

Progressives keep touting the carbon tax as inevitable, but then why does it always lose at the ballot box? In 2014 Australia repealed a carbon tax two years after it was imposed. Last year French President Emmanuel Macron was forced to suspend increases in gas and diesel taxes after national protests. Voters in Washington state defeated a carbon tax for the second time in November, and legislators recently pulled a proposal for a statewide carbon tax in Maine.

After digesting it all we don’t favor state or provincial carbon taxes but we do still favor a modest federal carbon tax.  We don’t favor the former because it is disruptive causing business to spend their time avoiding taxes.  We still favor the latter because we see no reason to treat gasoline differently from other forms of carbon.  Carbon does pose some risk for people and a price for emissions other than zero seems reasonable. We don’t want to leave the price to the academics because we want to ensure that a carbon tax is modest.  In addition, we see a great political opportunity because, as the WSJ editorial demonstrates, the progressives are hyper-interested in a carbon tax.

Let’s check out the “true” conservative and see what is bothering him.  Mario’s first concern about a carbon tax is:

The “conservative” perspective, at least insofar as I have had any role in articulating it, is not that climate change is a hoax or poses no risks but that we have more to fear from climate policy than from climate change itself.

We agree.  We think that this is an extremely strong argument for a modest carbon tax in the US.  That would be one way to reduce the risk from carbon policy.

Most of the rest of the article is about the limited risks from climate change.  We can’t say we agree on each and every point but we agree in general.  We both agree so why doesn’t he want to put a tax on carbon other than gas?  Here is where MWG doesn’t agree with Mario:

To put the matter more simply, there is no principled or stable compromise between market-driven American energy dominance and politics-driven deep decarbonization. [Emphasis added]

We admit to being confused by the part in bold.  Well, we just don’t understand it.  We  agree that there are decarbonization zealots but we don’t want to give them a link. We think that market-driven and deep decarbonization are mutually exclusive but not anywhere near collectively exhaustive.  We think both of those groups are relative small even though we belong to the former. We disagree that a modest carbon tax would embolden the left.  It is true that the left wants to increase every tax so the carbon tax would be no different.  It takes an act of Congress to change taxes.

Sidebar: Well, not exactly.  The president already has some authority to increase tariffs and Wisconsin’s own Sean Duffy (yes a Republican) wants to give him more authority to unilaterally tax Americans.  We are not for casting out but we have to say that Sean has lost his conservative mind on this one.  End Sidebar.

Mario thinks that a modest carbon tax would increase the uncertainty for businesses.  We think it would reduce the uncertainty.  We think it is a great opportunity to negotiate.  Surely Mario would like a reduction in the subsidies to “alternative” energy as a part of the package.

We don’t think that Mario has lost his conservative mind on the carbon tax.  He has made different judgments than we have.  We still like ours and still think that a modest federal carbon tax is good policy and good politics.



Happy Tax Day

We owe you some more stuff on university mergers but we need to wish you happy tax day.  Mark Perry at Carpe Diem has thoughts and information worth reading in full.  One of his links is the original 1913 tax form and instructions that we have used in class.  There is much to lament about the changes since then but, personally, the change we miss most is the last item, #20 on page four:

In computing net income [close to what we now call taxable income] there shall be excluded the compensation of all officers and employees of a State or any political subdivision thereof, except when such compensation is paid by the United States Government.

That’s right.  Employees of a state, such as MWG, paid no federal income tax.  Just like everyone we want our tax benefits!  What long dead #%*## took them away from us?  Some enterprising grad student should find out exactly when state employees were led to the slaughter.