Relevant and even prescient commentary on news, politics and the economy.

Two Wings of the Republican Party

by cactus

Two Wings of the Republican Party

A few facts (labeled with “F”s) and a few questions (labeled with “Q”s):

F1. Sarah Palin has stated that if McCain loses, she will stay on the national stage and perhaps seek the top spot herself in 2012.
F2. Sarah Palin’s presence on the ticket has energized much of what one might term the “Moral Majority” wing of the Republican Party.
F3. Sarah Palin’s presence on the ticket has horrified much of what one might term the “intellectual” wing of the Republican Party, and has been cited as a reason for several prominent members of this wing endorsing Obama.

Q1. Why are the “intellectuals” so horrified by Palin? She doesn’t seem so different from Dan Quayle… or GW Bush for that matter. She also doesn’t seem all that different from Mike Huckabee – sure, he was not the “intellectual”‘s first choice, but I can’t imagine if Huckabee had pulled off the nomination the “intellectuals” would be in this much of a snit. What am I missing here?
Q2. A follow-up to Q1 – Given that the “intellectuals” worship at the altar of Reagan, and Reagan was essentially the one who created the “Moral Majority” wing of the Republican Party as it now stands, is it inconsistent of the “intellectuals” to get this incensed by the “Moral Majority” wing’s champion?
Q3. If F2 and F3 remain as they are, would the Republican party be fractured by a Palin nomination in 2012?
__________________________
by cactus

Comments (0) | |

Debt watch

by OSO

Sadly that is the case. US Public debt has increased and in the last
week it has gone up over $1000.

I’m running a weekly debt watch over at my blog. It’s simple mathematics
really: Public Debt as % of latest GDP figures, as well as Public Debt
divided by latest population figures.

One Salient Ovesight

Last week, public debt was $6.19 Trillion
This week, public debt was $6.25 Trillion

Last week, public debt/GDP was 43.32%
This week, public debt/GDP was 43.73%

Last week, public debt per person was $20,264.04
This week, public debt per person was $21,378.59

All figures sourced from latest figures:

Public debt is sourced from http://www.treasurydirect.gov
GDP is 2008 Q2 – $14.29 Trillion – sourced from http://www.bea.gov
US Population is 305,449,862 – sourced from http://www.census.gov

Intergovernmental debt is not included in these figures (unlike the
“debt clock”)

Comments (0) | |

Election Story Interlude

In contrast to Mankiw’s attitude (see cactus’s post below*), my favorite election story of the year comes from Ms. Mochi_tsuki:

So they started explaining to me what an absentee ballot is and how to fill one out. I pointed out that I’d spent 11 years of my adult life overseas and was very familiar with the process. One of them pointed to the other and said, “He’s been overseas as well. He’s a retired Admiral.” WTF?

You may know this, but by law, there are never more than about 200 Admirals in service. Really rare creatures, those. This one? Retired last month. And he’s spending his weekends working on the GOTV effort in rural Virginia.

But I guess retired Admirals don’t need the motivations that economics professors do.

*In fairness to Mankiw, he knows his numbers are b.s. The giveaway: “In a sense, putting the various pieces of the tax system together, I would be facing a marginal tax rate of 93 percent. [italics mine]” Not to mention the corporate tax free finesse, and the assumption that r=0.10, but lets sidebar those.

Tags: , , , , , Comments (0) | |

Mankiw’s Incentives

by cactus

Mankiw’s Incentives

I know this has received comment here at Angry Bear a few weeks back (sorry – I’m in too much of a hurry to find the link right now) but a post by Greg Mankiw looking at his own incentive structure under the proposed Obama and McCain tax systems sticks in my craw. He writes:

That is, Obama’s proposed tax hikes reduce my incentive to work by 62 percent compared to the McCain plan and by 93 percent compared to the no-tax scenario. In a sense, putting the various pieces of the tax system together, I would be facing a marginal tax rate of 93 percent.

The bottom line: If you are one of those people out there trying to induce me to do some work for you, there is a good chance I will turn you down. And the likelihood will go up after President Obama puts his tax plan in place. I expect to spend more time playing with my kids. They will be poorer when they grow up, but perhaps they will have a few more happy memories.

Wonderful. Someone should inform him that the employment to population ratio is lower now than it was when the President he advised took office, lower than when that President began following policies Mr. Mankiw promoted and supported, and lower than it was than when he officially became his President’s chief economic advisor. Most of these extra unemployed, not to mention the extra underemployed folks, are not there because they chose to spend more time with their kids. Their kids will grow up poorer, and with memories of seeing their parents worry about paying the bills and putting food on the table. See, very, very little of what Mankiw’s President and Mankiw said, when it comes to the economy, came to pass. Their policies have not worked. And now Mankiw tells us about his own work incentives? Its a pity they can’t be applied retroactively – maybe millions of people didn’t have to be made poorer if folks like Mankiw and his President could have been induced to leave the rest of us alone.

Comments (0) | |

New savings vehicles in the works?

Investment News suggested the following is being considered:

House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller’s Education and Labor Committee on her proposal.

George Miller: Looking at redirecting tax breaks to a new system of guaranteed retirement accounts.
At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.
Under Ms. Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

I have not read anything from the Obama camp about such an idea, nor that “senior” Dems are even considering it. Thoughts?

Comments (0) | |

Why I Don’t Do Market Timing

Starting in September, my income, such as it were, is basically in C$.

Stephen Gordon explains, with graphics, why that has been such a bad trade.

The scariest part:

The 2002-2008 expansion provided significant real income gains, and more than half of those gains were due to the improvement in Canada’s terms of trade.

So there really isn’t an infrastructure in place to benefit from autonomy.

Right now, Stephen Harper should be in consideration for the title of the Luckiest Man on Earth.

Tags: , , , Comments (0) | |

Is Douglas Holtz-Eakin still an economist?

Via Dr. Black, we get CNN reporting:

Younger, healthier workers likely wouldn’t abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain’s senior economic policy adviser.

“Why would they leave?” said Holtz-Eakin. “What they are getting from their employer is way better than what they could get with the credit.”

And why is it better? Because of the tax credit that is going away.

But let’s be nice to a man who has, in the past few months, eliminated his credibility to ensure that no ex-GWBush Administration official retains his or her reputation after leaving office.* Let’s assume he’s telling the truth.

So the young, healthy workers stay with the employer plan (that, miraculously, doesn’t go away in a miasma of Moral Hazard**). This leaves the older workers, who no longer get a decent deal from their employer, to find something in the marketplace.

Gosh, guess what happens when your selection group becomes more Adverse? Costs go up.

So let’s review what Holtz-Eakin has actually declared, explicitly and by implication:

  1. Younger workers will keep the employer-provided health insurance, since it would cost them more to buy on their own
  2. Older workers won’t be provided with insurance, and it will cost them Even More than More to buy health insurance on their own.

Even if we were ignoring that Health Insurance is NOT HEALTH CARE,*** John McCain’s proposal, by the admission of his own Economic Advisor, makes the current situation appear Pareto-optimal.

Which leaves us only one question: Why would any economist support it?

*I should probably stipulate positive here. For instance, anyone who followed Condi “I was National Security Advisor on 11 Sep 2001” Rice’s prior career wouldn’t have expected much from her.

**Using the actual Health Economics definition here, not the generic phrase to describe why we need to give Goldman Sachs and Jamie Dimon $700 Billion.

***Yes, I’m shouting. Claiming to address health care when all you address is health insurance is like claiming to have fixed a smashed-in door by changing the lock on it.

Tags: , , , , , , Comments (0) | |

Who is Neel Kashkari?

by rdan

Who is Neel Kashkari?

Neel Kashkari was designated as the Interim Assistant Secretary of the Treasury for Financial Stability on October 6, 2008. In this capacity, Mr. Kashkari oversees the Office of Financial Stability including the Troubled Asset Relief Program.

Mr. Kashkari also continues to hold the position of Assistant Secretary of the Treasury for International Economics and Development, but his International Affairs responsibilities are delegated to Assistant Secretary for International Affairs Clay Lowery while Mr. Kashkari serves as Interim Assistant Secretary for Financial Stability.

Mr. Kashkari joined the Treasury Department in July 2006 as Senior Advisor to U.S. Treasury Secretary Henry M. Paulson, Jr. In that role, he was responsible for developing the President’s Twenty in Ten energy security plan, enhancing Treasury’s engagement with India, particularly in the area of infrastructure development, and developing and executing the Department’s response to the housing crisis, including the formation of the HOPE NOW Alliance, the development of the subprime fast-track loan modification plan, and Treasury’s initiative to kick-start a covered bond market in the United States.

Prior to joining the Treasury Department, Mr. Kashkari was a Vice President at Goldman, Sachs & Co. in San Francisco, where he led Goldman’s IT Security Investment Banking practice, advising public and private companies on mergers and acquisitions and financial transactions. Prior to his career in finance, Mr. Kashkari was a R&D Principal Investigator at TRW in Redondo Beach, California where he developed technology for NASA space science missions such as the James Webb Space Telescope.

And who will succeed him after the election? And will it matter?

Comments (0) | |

November 4 a watershed moment or not

by rdan

An opinion at Salon caught my attention….here is part of the main point:

As his campaign manager has described it, John McCain is now looking at a “narrow-victory scenario.” “The fact that we’re in the race at all,” added Steve Schmidt, “is a miracle. Because the environment is so bad and the head wind is so strong.”

But talk of miracles and head winds aside, I think John McCain really does have a decent shot at winning, and that’s not just because I’m a longtime Republican political operative. Despite what the polls seem to be saying, a closer look at the numbers shows that a Democratic victory is not a foregone conclusion. Why? Because if history is any guide, Barack Obama, as an African-American candidate for political office, needs to be polling consistently above 50 percent to win. And in crucial battleground states, he isn’t.

I do not care about the “Bradley effect” chatter, I will be watching how the votes are counted in different states, either by per centages, provisional votes and possible challenges, and exit polling versus reported counts. What a race! More than meets the eye.

Comments (0) | |

Taxation’s Rhetoric: Today and yesterday’s economic crap

by: Divorced one like Bush

In a posting regarding which presidents would be considered socialist I found the following curious:
1921 – 4% 73% Census
1922 – 4% 56% Census
1923 – 3% 56% Census
1924 – 1.5% 46% Census
1925-1928 – 1.5% 25% Census
1929 – 0.375% 24% Census
1930-1931 – 1.125% 25% Census

1982-1986 12 brackets 12% 50% IRS
1987 5 brackets 11% 38.5% IRS
1988-1990 3 brackets 15% 33% IRS
1991-1992 3 brackets 15% 31% IRS

2001 5 brackets 15% 39.1% IRS
2002 6 brackets 10% 38.6% IRS
2003-2008 6 brackets 10% 35% IRS

Notice anything about these 3 groups of income tax rates? No, I’m not suggesting that the lower rates are the smoking gun of today’s economic crap. Don’t want to run afoul of those scoldings of association is not causation critiques. But, do you not find it just a bit curious that approximately 8 years prior to an economic troubling time we get talked into reducing that tax rates? Three periods in history, all preceding an economy of crap. Varying degrees of crap, but crap just the same. We even had a housing bubble for 2 of them!

None of these tax changes can happen without convincing. A dialog has to have happened to convince the people that it is a good idea. And, I bet that the rhetoric of tax reduction is only part of a package regarding the overall idea of what is best to “grow the economy”. I bet, that tax reduction presentations have never been presented as a stand alone, single issue, unrelated to accomplishing a larger money shift. Being that we are relating today to the Big One, while at the same time hearing muttering that we are in “new territory”, my Angry Bear side asked: What else is similarly presented in the 20’s as part of a sales job of an over all ideology that preceded today’s and yesterday’s crap?

Installment Sell

Manufacturers realized they could expand their profits if they could grow their markets and so installment selling was introduced. The increased production volumes reduced the unit cost of items making them more affordable, and easy terms made for easy sales.

There is a reprint of an article specifically looking at the pros and cons of credit purchasing. Rather fascinating reading.

PAYING FOR THINGS ON “EASY” TERMS has become such a conspicuous element in American life, and so large a factor in our prosperity, that the economists have been doing a great deal of worrying about it. Source: The Literary Digest for March 5, 1927

Sub-prime anyone? Oh, did you notice that it was a concerted effort to sell the consumer that installment purchasing was good? I wonder if blaming the consumer for spending what they did not have was part of the discussion when the economy turned to crap then?

THE CHRISTMAS CHEER IN WALL STREET 1926

Christmas distribution of bonuses in Wall Street, when finally added up, is expected to prove the most generous ever made except during some of the flush World War years.

No accurate account of sums paid out can be made, according to the New York Times, because many firms do not announce their benefactions, but last year’s total was estimated at $50,000,000, and it is expected that the Wall Street firms paying bonuses are being no less generous this year. In fact, some firms which have never paid bonuses will start the custom this Christmas. Probably the largest distribution, we read, is being made by banks, which have been exceptionally prosperous.

Converting that $50 million we get various amounts: $586 million via CPI, $494 million via GDP deflator, and (drum roll please), $1.999 million via unskilled wage factor.

There was one perspective that was not accurate in their prophecies for America:

America has played square in China, and will have an inside track in China against the commerce of other nations.
China buys one billion dollars worth of outside goods every year. But that’s only, a drop in the bucket compared with what this customer may buy some day. “When the per capita foreign trade of China,” runs one government report, “is equal to that of Australia, the total will be sixty-five billion dollars a year which China will pay to the outside world for her imports.
“You can’t help seeing American business grow in China,” a business man from China told me. “Why, it has multiplied itself by four within the past dozen years. It’s eight times bigger than it, was thirty years ago.

The inaccuracy? The quotes are from a perspective of the American selling to China, not from China. And you thought Nixon opened up China.

Getting back specifically to the tax reductions, this web site offers a lot: The Tax History Museum
From reading the site, it appears a progressive tax system was put in place for the WW I war effort. They even put in a munitions tax to “appease” opponents of American involvement in the war; levied on manufacturers of military equipment, it was designed to prevent war profiteering”. There was an “excess profits” tax put in place which appears to be what the later progressive income tax became. Arguments for it were as today: equality. Against it:

It attracted bitter opposition from business groups, who considered the tax a threat to managerial prerogatives. They were certainly justified in their suspicion, since both Wilson and his allies in Congress considered the levy a legitimate means of business regulation.

Well slap me silly! A tax used to curb the excess of business. I hear some of you saying: Excessive CEO compensation regulation please?

After the war, the argument was that such high rates were “unsustainable”. It was the party of today’s tax cuts who yesterday cut the taxes:

Republican lawmakers joined with a series of GOP presidents to engineer tax cuts in 1921, 1924, 1926, and 1928. Andrew Mellon — who moved into his Treasury office in 1921 and stayed their until 1932 — was the principal architect of these reforms.

Certainly some Democratic elected joined in (early Blue Dogs, DLC’s of their time?).

In 1980 we got schooled in the Stockman trickle down theory of economic growth which included lower taxes will raise collections and bolsters economic growth. It was all about cutting taxes by his confession though. So, as I look to find evidence of selling tax cuts as a part of an ideology sell job regarding how an economy should run, such being clues that in the near future we will have economic crap, the following regarding Mr. Mellon’s position just confirms how ignorant we have been in our recent times (post 1981) to have followed those who suggest tax cuts as part of their economic program:

“Any man of energy and initiative in this country can get what he wants out of life,” he wrote. “But when initiative is crippled by legislation or by a tax system which denies him the right to receive a reasonable share of his earnings, then he will no longer exert himself and the country will be deprived of the energy on which its continued greatness depends.”

Worse yet, Mellon argued, high rates didn’t even raise money. By encouraging both legal tax avoidance and illegal tax evasion, they eroded the tax base and reduced overall revenue. Lower rates, he said, would actually raise money by spurring economic growth and reducing the incentive for tax avoidance. “It seems difficult for some to understand,” he complained, “that high rates of taxation do not necessarily mean large revenue to the government, and that more revenue may actually be obtained by lower rates.”

Can we have been any more stupid, shown our ignorance more than to have taken as a new idea, language regarding taxation’s need to be reduced and it’s effect on filling the government coffers that is as old as almost the day progressive taxation came into existence? Unfortunately, our stupidity has been worse than accepting Mr. Mellon’s similar arguments to those used by Reagan et al suggests. That is because, back in Mr. Mellon’s day he at least understood what Mr. Buffet of today understands but congress and by extension US do not:

Of particular note, he suggested taxing “earned” income from wages and salaries more lightly that “unearned” income from investments. As he argued:

The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs.

Surely we can afford to make a distinction between the people whose only capital is their metal and physical energy and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earnings capacity is at an end.

Again I ask: HOW MANY TIMES DO WE HAVE TO DO THIS? HOW MANY FREAKIN’ TIMES DO WE HAVE TO LEARN THE LESSON?

Tags: , , , , Comments (0) | |