Those Countries

The Donald has put his foot in mouth again by describing certain countries as shitholes or perhaps some other scatological comparison.  We think some of the reactions are silly and some are overwrought.  Let’s look at two:

A Facebook comment:

My ancestors came from a shithole country, Ireland, looking for a sustainable life, escaping famine.  [Emphasis added]

A comment on Jim Geraghty in the Morning Jolt:

The message from the president – and the subsequent refusal to deny, retract, or disavow the comments – is clear: people from these places have no value.

Wikipedia takes care of the Facebook comment in one sentence:

The famine was a watershed in the history of Ireland,[1] which was then part of the United Kingdom of Great Britain and Ireland.

So, in fact, those ancestors left the greatest economic and military power in the world to try an up and coming United States.  The folks in Ireland could have gone elsewhere but they were often looking to avoid the British who were near the height of their empire.

Jim’s comment might be more over the top than the one on Facebook.  Jim doesn’t like profanity and we would like to see less of it too but we can’t see how The Donald is saying people in those countries have no value.  He is denigrating the country rather than the people.  Denigrating the a country in a large meeting with both parties is not the height of wisdom.  Yet we do not want to end up as the overflow valve for failed countries.  We want countries to be able to verify their citizens for travel and other purposes.

We got the message.  It was poorly crafted.  It was especially poorly crafted considering the audience.  There is no need to try and create another message.

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The Donald: 2017

There has been much discussion about evaluating or re-evaluating The Donald because of the things that have happened during the first year of his presidency.  Kevin Williamson at NRO finds it the year of lost opportunities.  Kevin concludes:

That 2017 has been a year of lost opportunities is an important failure for Republicans, who are likely to accomplish even less in 2018, when the prospect of congressional elections held in the shadow of Trump’s unpopularity will brighten the already visible yellow streak running down the back of Republican Washington.

Jonah Goldberg at NRO concludes that the accomplishments should not be attributed to The Donald.  He says:

To listen to Trump’s cheerleaders, the biggest obstacle to conservative victories is the party establishment, when in reality it looks more like it’s running the show.

Ramesh Ponnuru at NRO is much more positive.  He thinks The Donald has been a success on policy matters but hasn’t always made wise choices: Ramesh starts:

Gorsuch confirmed, ISIS defeated, taxes cut: The Trump administration has compiled a solid record of accomplishment in its first year, one that compares well with the records of many of its predecessors.

Daniel Henninger at the WSJ is close to Ramesh.  He says:

The two Trump presidencies exist as parallel universes. One is inhabited by Trump of Twitter, a character out of Rabelais’s novel “The Very Horrific Life of Great Gargantua.” Much of the American population is appalled by Trump of Twitter, who lives in a dark and deeply personal pool of feuds and fulminations. His first-year approval rating floated below 40%, while voters in Virginia and Alabama rejected his candidates, and him.

Existing alongside is a universe of solid, tangible economic success. Reporting on the season’s strong holiday retail sales, this newspaper noted that consumer confidence is at a 17-year high, with unemployment at a 17-year low—a time-frame that turns the Obama presidency into a forgotten memory.

We think it is simple.  The Donald has had an excellent first year.  Except for HW, and we could debate that, he has had the best first year since WWII.  So yes, Truman’s first year was better.

Deregulation is a big accomplishment for The Donald that is mentioned but didn’t make it in the quotes.  In addition we think he has done something that has not been mentioned that has long term importance.  He has not been reluctant to nominate “controversial” folks.  Over the past 40 years the press has made it difficult on GOP nominations.  Our explanation is that folks that are within one standard deviation to the right of center are acceptable but folks that are within three standard deviations to the left of center are acceptable.

Sidebar: Go to Wikipedia and normal distribution and click on standard deviation and coverage for background.  What it implies is that 34% of the folks to the right of center are acceptable but 49.8% to the left of center are.  We are not suggesting that there is any data to suggest that this is the exact ratios but we are convinced that it is a reasonable approximation.  End Sidebar.

We are glad to see the back of some of The Donald’s nominees but people like Betsy De Vos and Nikki Haley have been good and driven the left and the press wild.  See this hit piece on Betsy from the Washington Post.

We think The Donald’s nominees will help to dull the yellow streak that Kevin sees and will give next GOP president more leeway on appointments.   We make few predictions about the future but The Donald has one good year in the books.  With 2018 being an election year there will be even more challenges upcoming.

 

 

Tax Cut Complaints

The WSJ is good about bringing in opposing views on its opinion page.  Recently Alan Blinder had a headline of: Almost Everything Is Wrong With The New Tax Law.  We were curious as we have supported it.  We first checked to see his background: Professor of economics at Princeton and former vice chairman of the Federal Reserve.  The first qualification makes us nervous about his seriousness but it is probably worth reading.

If you are trying to convince the unconvinced then you start with your best shot.  Here is how Alan starts with specifics after saying it offers mere crumbs to the middle class:

Further, once the phase-outs occur at the end of 2025, even most of the crumbs disappear. The Tax Policy Center estimates that the share of tax cuts accruing to the top 0.1% of taxpayers will rise from 8% in 2018 to an astounding 60% in 2027 if Congress doesn’t extend the expiring cuts. [Emphasis added]

So, Alan is telling us they should extend the tax cuts.  We agree.  In addition he slays his “mere crumbs” argument.  The top 0.1% of tax payers get 8% of the benefits in 2018.  We can’t find an exact figure for the percentage of tax paid by the top 0.1% but we estimate it at 19%.

Sidebar: The top 1% paid 38.1% of income taxes in 2012.  Comparing the top 0.1% taxable income versus the top 1% in table 3 shows it to be about half.   Another table shows that the tax rates for the top 0.1% are slightly lower than the top 1%.  So 38 percent multiplied by a half is a reasonable approximation.  End Sidebar.

So folks the super-rich folks paying 18% of taxes get 8% of the benefits.  We would have liked to see the tax cut be more pro growth but Alan winning the argument against himself.  Next he goes for the trickle down slur and then he complains about process.  In between he brings up a real issue: The deficit.  We agree.  It needs to be fixed.  Part of the fix is increasing economic growth through tax policy and regulation reductions.  Another part is reforming entitlements.  We expect Alan’s support as entitlements will come up soon.

Alan convinces that we should continue to support the new tax bill and the provisions should be extended.  It is not perfect but it is a good start.

 

 

 

 

Facebook Irony

One of our friends reposted a Facebook item recently.  One of the reasons we started this blog was to be able to respond to foolish things on Facebook because it is too cluttered with political stuff.  We are sure there have been more foolish things but it is hard to imagine something more ironic.  Here it is:

Imagine instead of $1.5 Trillion Tax Bill, they had produced a $1.5 Trillion infrastructure bill.  Take about creating jobs!

Of course The Donald’s Immediate Predecessor (TDIP) did sign a $1.8 Trillion spending bill.  A supporter said:

“This is a bill that protects America, rebuilds it and invests in the future,” she said. “I think it’s a great bill; it’s a result of bipartisan effort [imagine that]. Let’s vote for it, and may the Force be with us.”

The result for TDIP:

With unemployment hovering near 10 percent nearly two years after President Obama signed his economic stimulus package, Mr. Obama is acknowledging that, despite his campaign promises, “there’s no such thing as shovel-ready projects.”

If TDIP can recognize it then everyone should.  Now we will wait for two years as the press gives the president the benefit of the doubt before starting to evaluate the tax cut.  That’s more irony in case you weren’t sure.

Tax Nonsense

Andrew Stuttaford has a long nonsense post at the NRO Corner.  Fortunately he explains why in the first paragraph so you don’t have to read anymore.  Here is Andrew’s first paragraph.  We have comments in brackets.

True tax reform  [no other improvements are relevant] should aim to satisfy four main ‘fiscal’ principles: It should aim at a tax system that is flatter (with lower nominal rates), broader (as many people as possible should have skin in the game) [only relevant for individuals], simpler and, even allowing—as I would –for some supply side magic, it should be fiscally responsible.  As that final goal is extremely difficult to reconcile with those earlier principles without either truly brutal [nope, but likely to be portrayed as such] claw-backs in entitlements (not something I would favor [something we very much favor]) or (my very clear preference [us too]) some sort of federal VAT/GST/Sales tax, both political impossibilities for now [agree], the best that can be hoped for is that any change in the tax regime should not worsen the country’s (unattractive) long term financial condition by too much.

Then Andrew says the plan does great things by reducing corporate rates and eliminating AMT but he sadly informs us that it is not true tax reform.  If you are wiling to accept less than the full MWG plan,

Sidebar: The full MWG plan starts with the Graetz plan and reduces or eliminates a variety of taxes including corporate taxes, AMT, tariffs, and gas tax while adding VAT and carbon taxes.  We are not holding our breath.  End Sidebar.

as we are, then the question is does it improve the current system?  The answer, as Andrew seems to admit is yes it does improve the country’s long term financial condition by improving the business side.  We too would like more improvements on the individual side but it is unlikely to happen.  At some point there will be a binary choice.  As long as the GOP proposal includes “true” business tax reform we are going to support it.  Andrew could have just said that he was waiting for true tax reform from a true Scotsman and we would have understood it in one sentence.

Appropriate Comments And Not

Some time ago The Donald stirred the pot by commenting on the kneelers in the NFL.  He said:

Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, “Get that son of a bitch off the field right now. Out. He’s fired. He’s fired!” You know, some owner is going to do that. He’s going to say, “That guy that disrespects our flag, he’s fired.” And that owner, they don’t know it. They don’t know it. They’ll be the most popular person, for a week. They’ll be the most popular person in this country.

The Donald is right.  People would love it.  We are not big fans of these comments in the manner of The Donald’s immediate predecessor but we recognize the nature of politics.  We would like presidents to be more presidential but the events of the last 25 years have argued against it.

Meanwhile, in India, Vidhi Doshi in the WaPo reports:

The release of a highly anticipated Bollywood blockbuster has been delayed after a politician from India’s governing party offered a bounty of $1.5 million for the heads of the movie’s star and director amid outcry that the film distorted Hindu legend.

Others have threatened to break the legs of the actor who plays the Muslim villain.  Two things:  First, and obviously, the comments of The Donald and the Indian politician are entirely different.  It does’t matter if the latter’s speech constitutes fighting words or not.  This is not a legal issue.  It is an issue of appropriate behavior.  The Donald is OK and the other is not.

The other point is how the WaPo categorized this outbreak of incivility.  Was it intolerance, racism, or something else?  Here is what they said:

The violent reaction to the film’s release further suggests a groundswell of conservatism in Modi’s India.

It appears that conservatism is consistent with calling for cutting off heads and breaking legs.  We are not sure how Vidhi came to that conclusion.  We would be interested to hear Vidhi’s description of conservatism.

The Tax Bill 11/12/17

Well, there isn’t a tax bill at this time.  There are two: one in the Senate and the other in the House.  It isn’t a binary choice yet and there will be changes.  Although there could be some improvements it seems unlikely that there will be major changes.  We think that the crucial area for improvement at this time is in business taxes and both the proposals deliver that.  We are in agreement with Laurence Kotlikoff at WSJ:

But the new tax plan, while far from what I and other tax specialists would design, will boost the economy, generate more revenue, maintain fairness, and raise Americans’ living standards. It’s imperfect but worth passing.

Let’s find some other conservative opinions.  Edward Lazear at the WSJ likes the basic frame work but doesn’t like that the full expensing is temporary and has a solution to make it permanent:

One way to offset that would be to use a more targeted approach to reducing the taxes paid by small and midsize businesses.

We care about rates and not full expensing because most businesses are not manufacturing.  We don’t want targeted solutions.  We want lower rates for businesses.  We will count Edward are leaning towards passage.  The Editors at the WSJ have a different ruse, eliminating the Obamacare tax, in mind:

While the penalty raised $3 billion in revenue in 2015, Arkansas Senator Tom Cotton points out that abolishing the mandate would actually be a revenue gusher under the Congressional Budget Office’s scoring rules. Last December CBO projected that repealing the mandate would save $416 billion over 10 years because fewer people would sign up for Medicaid or receive subsidies on the exchanges. Fewer workers might also enroll in employer-sponsored plans, which could result in more taxable compensation.

Being who they are we are pretty sure they will have a hard time supporting tax reform without reductions in individual rates.  We will count them as undecided.  George Will has an entirely different idea.  He is concerned that less people will pay income taxes.  He finds that payroll taxes are different from income taxes.  We are not sure why he thinks that.  He wants to repeal and replace the Internal Revenue Code (IRC) starting with repeal:

This year’s best tax bill, which Representative Bob Goodlatte (R., Va.) has introduced six times since 2006, is four pages long and contains fewer words (411) than the new Republican bill has pages. It could be titled “The ‘What You Wished For, Mitch Daniels’ Act.” It is titled, with almost unprecedented accuracy, the “Tax Code Termination Act.” It would nullify the existing 4 million-word code as of Dec. 31, 2021, and require that by July 4 of that year it must be replaced by a new one, which would necessarily be one designed on purpose.

We are 100% with George but we don’t see why we can’t improve it now.  Kevin Williamson at NRO is taking aim at Catherine Rampell’s analysis of the Republican tax proposal in the Washington Post.  Kevin has been distracted by The Donald but he has great fun in this article although he really ought to pick on an equal.  You should read it all.  He starts off:

The Republican tax plan may be kind of dumb, but if it were three times as dumb as it is, it would only be half as dumb as the Washington Post’s analysis of it.

So Kevin, like us, supports a zero corporate tax rate and seems to support eliminating the death tax.  We would like a different tax reform but we are willing to vote for this one.  Kevin and George don’t seem to be getting enough reform.  It seems likely that they will get the status quo.

Our take is that we think the bill is a big improvement on the status quo on business taxation and that is the crucial area for reform.  We think that because many conservative pundits have a low option of The Donald they will argue for great solutions and that means it is less likely that we will get a good solution.  At some point it will become a binary choice.  We hope that everyone makes the right choice when it does.