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

Herman Cain and the Defense of Marriage

by Mike Kimel

Herman Cain and the Defense of Marriage

This isn’t my usual beat, but I was fascinated to read this statement by Herman Cain’s attorney:

Rather, this appears to be an accusation of private, alleged consensual conduct between adults – a subject matter which is not a proper subject of inquiry by the media or the public. No individual, whether a private citizen, a candidate for public office or a public official, should be questioned about his or her private sexual life. The public’s right to know and the media’s right to report has boundaries and most certainly those boundaries end outside of one’s bedroom door.

This is an odd position given that Cain supports a ban on gay marriage. After all, supporters of gay marriage have long argued that what two consenting adults do in their bedroom should be nobody else’s business. I wonder if Cain or his supporters will change their position on gay marriage.

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Is Capital Gains Tax Law Biased Against Low Income Investors?

Paul Caron at Taxprof blog points us to capital gains

Is Capital Gains Tax Law Biased Against Low Income Investors?

Min Dai (National University of Singapore, Department of Mathematics), Hong Liu (Washington University, Olin Business School) & Yifei Zhong (University of Oxford, Mathematical Institute), Is Capital Gains Tax Law Biased Against Low Income Investors?:

The current capital gains tax law stipulates that the tax rate for short-term investment (gains and losses) and long-term losses is equal to an investor’s marginal ordinary income tax rate, which implies that this rate for low income investors can be significantly lower than that for high income investors. In an optimal consumption and investment model with asymmetric long-term/short-term tax rates, we show that even though capital gains tax rates for low income investors are always lower than those for high income investors, the current capital gains tax law is significantly biased against low income investors in the sense that these investors are willing to pay a substantial fraction of their initial wealth to gain the same capital gains tax treatment as high income investors have. The main reason is that investors have the option of realizing capital losses at the (higher) marginal ordinary income tax rate and realizing capital gains at the (lower) long-term tax rate and the value of this option is significantly lower for low income investors than that for high income investors. This result is robust to various changes in model parameter values. Raising capital gains tax rates for low income investors to the levels for high income investors would reduce the bias and substantially increase stock market participation by low income households. With regard to the optimal tax realization strategy, in sharp contrast to most of the existing literature, we show that it can be optimal to defer short-term capital losses beyond one year and to realize short-term gains.

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The social safety net encourages…?

Mark Thoma responds to the meme that the social safety net encourages bad behavior overall:

The idea that the unemployment problem is due to lack of effort on behalf of the unemployed rather than a lack of demand is convenient for the moralists, but inconsistent with the facts. The problem is lack of demand, not the means through which we smooth the negative consequences of recessions.

But what really irks me is the implicit moralizing, the idea that people deserve to be thrown into poverty. Someone who gets up every day and goes to a job day after day, often a job they don’t like very much, to support their families can suddenly become unemployed in a recession through no fault of their own. They did nothing wrong — it’s not their fault the economy went into a recession and they certainly couldn’t be expected to foresee a recession that experts such as Casey Mulligan missed entirely. They had no reason to believe they had chosen the wrong place to go to work, but unemployment hit them anyway. And since one of the biggest causes of foreclosure is an event like unemployment, it’s entirely possible that this household would lose its home, be forced to declare bankruptcy, etc., and end up in severe poverty if there were no social services to rely upon.

What moral lesson is being taught here?

Imagine what the size of the deficit would be without FICA!  Ponder the meaning of these lines at a time when corporate profits are at record highs, and unemployment levels are at record highs!
Now, lets look at the data in a totally different way, to put all this in perspective.  Here, each source is presented as a percentage of the total Federal Tax Receipts.

Can’t tell you exactly what I might have expected, but it sure as hell wasn’t this.   Pick your inflection point – either ’77 or ’84 will do.  Since 1977, the percentage of the total paid by corporations has wobbled around a bit, but averaged 11% of the total.   The percentage coming from personal income tax has been 50%.  Obviously, the amount contributed by FICA is 39%.  Let’s have a look at trends since 1977.

The corporate tax trend is basically flat at 11%. The contribution from individual taxes is actually at a slight decline.  Meanwhile the trend for contribution from FICA has steadily increased for well over 30 years!
Are you as shocked as I am?
Here, to put the perspective in perspective, is a look at total receipts, on a log scale.

I’ve placed a couple of best fine lines, a blue one through the entire data set, and a red one through the period 1958 to 2000, which seems a little more regular than the entire set.  At the far end, we had the Great Depression and WW II.  At the near end we had Bush tax cuts, Bush wars, an the ensuing Great Recession. Surprisingly, the red line has a slightly lower slope than the blue line.  Not surprisingly, total receipts have been close to flat for the last decade, as the Bush tax policies have succeeded in starving the government.
General observations:
1)  During the post WW II golden age, the corporate contribution to total tax receipts, though continually declining, was typically far greater than during The Great Stagnation – the period since roughly 1980.
2)  The FICA contribution to the total, despite a break point to a lower slope circa. 1980, has grown steadily since WWII.  It is now virtually tied with personal income tax for the biggest contribution chunk.
3) Since the turn of the century, tax cuts and a stagnating economy have caused a huge gap in tax receipts.  Grover Norquist’s plan to destroy government by starvation is working like a charm – at the Federal, State, and local levels.
4) Not shown here, but obvious if you think about it or look for the data, is the decline the growth in government spending, at all levels – for everything except defense – since 1980.
If, like Norquist, you want life without government, take a look a Somalia.  Or dig out A Distant Mirror by Barbara Tuchman and see what life in Europe was like in the 14th Century – a time when society deteriorated, there was little or no effective government, and roving bands of thugs terrorized peasants, kings, and even the Pope.

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Looking Beyond Election Day

NYT Robert Reich calls our attention to post election 2012 life and political realities:

Looking Beyond Election Day

By Robert Reich, Robert Reich’s Blog

Most political analysis of America’s awful economy focuses on whether it will doom President Obama’s reelection or cause Congress to turn toward one party or the other. These are important questions, but we should really be looking at the deeper problems with which whoever wins in 2012 will have to deal.

Not to depress you, but our economic troubles are likely to continue for many years – a decade or more. At the current rate of job growth (averaging 90,000 new jobs per month over the last six months), 14 million Americans will remain permanently unemployed. The consensus estimate is that at least 90,000 new jobs are needed just to keep up with the growth of the labor force. Even if we get back to a normal rate of 200,000 new jobs per month, unemployment will stay high for at least ten years. Years of high unemployment will likely result in a vicious cycle, as relatively lower spending by the middle-class further slows job growth.

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Battlefield USA?…Senate NDAA, sec. 1031 and sec. 1032

I am late to the news on this one from yesterday, but want to make sure the provisions are noted and up for discussion.

Link to Thomas for S.1867.

Benjamin Wittes from Brookings has commentary worth reading. I have only included language used in the bill here.

Senate NDAA Thought #1 by Benjamin Wittes

The Senate’s NDAA language on detainee matters, about which I have previously written here and here, is now available. I have two additional thoughts on the Senate language–the first of which I will lay out in this post. It concerns Section 1032, the mandatory military detention provision I described–and bewailed–in my earlier post. I want to give a good faith effort in this post to imagine how this provision, if enacted, would function in practice. I think the most likely answer is that it would be an unmitigated disaster at an operational level. But there’s a slight wrinkle. Depending on the Executive Branch’s bureaucratic response to it, there is a vague possibility that it would have almost no impact at all.

The provision reads in its entirety as follows:


    (a) Custody Pending Disposition Under Law of War-

    (1) IN GENERAL- Except as provided in paragraph (4), the Armed Forces of the United States shall hold a person described in paragraph (2) in military custody as an unprivileged enemy belligerent pending disposition under the law of war.

    (2) APPLICABILITY TO AL-QAEDA AND AFFILIATED ENTITIES- The requirement in paragraph (1) shall apply to any covered person under section 1031(b) who is determined to be–

    (A) a member of, or part of, al-Qaeda or an affiliated entity; and

    (B) a participant in the course of planning or carrying out an attack or attempted attack against the United States or its coalition partners.

(3) DISPOSITION UNDER LAW OF WAR- For purposes of this subsection, the disposition of a person under the law of war has the meaning given in section 1031(c), except that no transfer otherwise described in paragraph (4) of that section shall be made unless consistent with the requirements of section 1033.

(4) WAIVER FOR NATIONAL SECURITY- The Secretary of Defense may, in consultation with the Secretary of State and the Director of National Intelligence, waive the requirement of paragraph (1) if the Secretary submits to Congress a certification in writing that such a waiver is in the national security interests of the United States.

(b) Requirement Inapplicable to United States Citizens- The requirement to detain a person in military custody under this section does not extend to citizens of the United States.

(c) Effective Date- This section shall take effect on the date of the enactment of this Act, and shall apply with respect to persons described in subsection (a)(2) who are taken into the custody or brought under the control of the United States on or after that date.

The “dispositions under the laws of war” laid out in Section 1031(c) include:

(1) Long-term detention under the law of war without trial until the end of hostilities against the nations, organizations, and persons subject to the Authorization for Use of Military Force.

(2) Trial under chapter 47A of title 10, United States Code (as amended by the Military Commissions Act of 2009 (title XVIII of Public Law 111-84)).

(3) Transfer for trial by an alternative court or competent tribunal having lawful jurisdiction.

(4) Transfer to the custody or control of the person’s country of origin, any other foreign country, or any other foreign entity.

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Lifted from comments on Peak life expectancy

Lifted from comments by reader and contributor Run 75441 on Peak life expectancy:

We do wear out after a period of time. I suspect how quickly we wear out could be based upon life style, income, and diet. To answer your first statement, obesity in the is generation of children has led to an expected lowering of longevity in the US. This is the first time that one US generation will not out live the preceding generation. Diabetes is one of the fastest growing disorder plaguing the population of the US. Why???

Saletan at Slate had argued against the a law being passed in LA which had restricted the numbers of fast food restaurants in one section of the city. Never mind there was a fast food restaurant within walking distance for the residents of this particular section of LA or that there was one fast food restaurant for every 1300 residents. Cheaper, fattier, and less healthier foods are more readily available today and/or in lower income areas than ever before and this trend is growing overseas as well. The convenience of fast food impacts not only low income; but, it has also becomes a matter of convenience for high income as as well. Quality of food and the availability of quality food are issues.

We walk less and do less manual labor than our babyboomer predecessors. With the advent of suburbs outside of the cities and the two income families to make ends meet, we find ourselves driving more than we do taking busses, trains, or walking to work. People and industry moved out of the cities. The work level for many of us confines us to our desks for numerous hours. At the other end of the spectrum the lower incomes still face long and hard hours doing manual labor in order to meet the needs of a family. Income has stagnated for much of the population requiring a two earner income. The numbers of people within the Civilian Labor Force has decreased with the shift of emphasis from labor intensive investments to investments that are little more than gambling producing greater gains. Productivity gains have shifted away from labor to capital since the eighties.

The healthcare model is still services for fees which is heavily skewed towards specialties rather than preventative care. This has to be changed to a better
outcomes for fees with a heavy emphasis on preventative healthcare. While the ACA is not the shining beacon we could have had, it is a start in the right direction. The access to healthcare is still limited to those who have jobs and who also can afford it.

Briefly, all three of these factors are having an impact on the health of the population.

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Krugman, Roubini, and the Eurozone

Krugman highlights but provides no link to Nouriel Roubini’s address to the 2006 Davos meeting (direct link to Economonitors here).

What I would say is that this incident exemplified something that was going on all along the march to the eurodebacle. Serious discussion of the risks and possible downsides was simply not allowed. If you were an independent economist expressing even mild concerns about the project, you were labeled an enemy and shut out of the discussion.

and in the same op ed It’s Not About Welfare States (via truthout) reviews election rhetoric and disinformation on the economic crisis in Europe being mainly welfare oriented countries:

Whenever a disaster happens, people rush to claim it as vindication for whatever they believed before. And so it is with the euro.

As an aside, the interesting thing about the introduction of the euro from a political point of view is the way it cut across the ideological spectrum. It was hailed by the Wall Street Journal crowd, who saw it as a sort of milestone on the way back to gold, and by many on the British left, who saw it as a way to create an alliance of social democracies. It was criticized by Thatcherites, who wanted to be free to move Britain in an American direction, and by American liberals, who believed in the importance of discretionary monetary and fiscal policy.

But now that the thing is in trouble, people on the right are spinning this as a demonstration that … strong welfare states can’t work.

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Barry Ritholtz Eviscerates the Big Lie

by Mike Kimel

Barry Ritholtz looks at the Big Lie.

The big lie of the financial crisis, of course, is that troubling technique used to try to change the narrative history and shift blame from the bad ideas and terrible policies that created it.

In particular, Barry is interested in this:

Take for example New York Mayor Michael Bloomberg’s statement that it was Congress that forced banks to make ill-advised loans to people who could not afford them and defaulted in large numbers. He and others claim that caused the crisis. Others have suggested these were to blame: the home mortgage interest deduction, the Community Reinvestment Act of 1977, the 1994 Housing and Urban Development memo, Fannie Mae and Freddie Mac, Rep. Barney Frank (D-Mass.) and homeownership targets set by both the Clinton and Bush administrations.

He then goes on to a very exhaustive look at the evidence. Read the whole thing at Barry’s place.

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Peak life expectancy

Yves Smith points us to a MacroBusiness post on declining peak life expectancy which points to the Institute for Health Metrics and Evaluation (this link is to an array of articles, as the link in MacroBusiness appears to stop at the gateway). Yves states:

This post from MacroBusiness points to a development that has (predictably) gone largely unreported in America, namely, that life expectancy is declining. The article discusses some of the probable causes and implications. It interestingly omits rising income disparity as a culprit. We quoted Michael Prowse on this topic in early 2007:

By Cameron Murray, a professional economist with a background in property development, environmental economics research and economic regulation. Cross posted from MacroBusiness

Life expectancy has peaked in some US States according to recent research. This follows research published in 2005 that suggests current living children may not outlive their parents, and that peak life expectancy in the US may be reached between 2030 and 2040. Mostly, this is attributed to the massive spike in childhood obesity which typically results in lifelong obesity and associated health problems.

Reader Sock Puppet points us to several other sources for discussion:

Slide show obesity with time by state

County data maps life expectancy pretty well
CDC sourcing.

Food stamp map tracks well too

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