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The Tax-Cut Framework Won’t Create Jobs and Digs the Inequality Ditch even Deeper

The Tax-Cut Framework Won’t Create Jobs and Digs the Inequality Ditch even Deeper

Marcus Ryu, a self-described Silicon Valley entrepreneur who created, with others, a company now worth $5 billion on the New York Stock Exchange, argues in today’s Op-Ed section of the New York Times that “Tax Cuts Won’t Create Jobs“, NY Times (Oct. 9, 2017), at A23 (the title in the digital edition is different from the print title:  Why Corporate Tax Cuts Won’t Create Jobs).  He is right.

The tax cuts proposed in the framework set out by the Trump administration and Republican leaders in Congress claims to be pursuing economic growth that will benefit ordinary people (Trump’s purported base).  These claims are based in part on claims that  U.S. taxpayers (individual, corporate and individual who owns businesses through partnerships) are much more heavily taxed than taxpayers in other advanced countries.  Trump often points to the statutory tax rate for corporations (35%), which is higher than the statutory rate in most other advanced countries. But Trump usually ignores the fact that the vast majority of corporations (including very profitable U.S. multinationals) pay no or much lower taxes, in part because of the many loopholes and deductions that reduce the income that is taxed.  When one considers the nation’s GDP and the percentage of GDP paid in taxes, it is quite clear that the U.S. is actually one of the lowest taxed of developed countries, which often have income taxes, corproate income taxes and value-added taxes (which the U.S. does not have), as well as specialty taxes such as financial transaction taxes (which the U.S. does not have).  See, e.g., Business Insider, Is the U.S. the highest taxed country? (Sept. 6, 2017).

“[T]he most comprehensive measure by which to judge Trump’s claim, combining corporate and individual taxes paid, is tax burden as a percentage of gross domestic product. It compares how much money in a country is put toward taxes with the economic output of the country.  By this measure, the US has the fourth-lowest tax burden of any OECD country, with only South Korea, Chile, and Mexico ranking lower.” [emphasis added]

Trump has claimed that the proposed cuts in the Trump tax-cut “reform” framework don’t benefit the wealthy and don’t benefit him but are for the middle class and those with less wealth and income.  The only way that claim would work would be if tax cuts that are clearly targeted at the rich (elimination of the estate tax, elimination of the AMT, drastic cut in the rate at which wealthy partners pay taxes on partnership income shares, drastic cut in the corporate tax rate  when most of the benefit of tax cuts to corporations is used to pay dividends or do share buybacks for the wealthy managers and shareholders) had such a dramatic impact on overall economic growth and on sharing of the benefit of the tax cuts with ordinary workers that it made up for the fact that almost all of the benefit goes directly to the very wealthy and almost all of the negative impact (via additional borrowing and deficits) will result in fewer benefits from the poor.  That positive balance is so unlikely from these tax-cuts-for-the-rich that they appear to be just another of the many Trump lies intended to mislead the American people.  See, e.g., Business Insider, Trump tax reform plan just got its first brutal review showing how it would benefit the rich and almost no one else (Sept.  2017) (noting that “Americans among the top 1% of earners would see the bulk of the plan’s benefits, while lower- and middle-class Americans — even most upper-class people — would see few benefits,” citing the Tax Policy Center’s study of the framework).

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CRISPR Critters

The first applications of gene editing are (will be?) to fix deleterious mutations. Nobody, or almost nobody, will complain when previously horrible diseases get fixed before a child is born. But the practice won’t stop there. There will be a progression of editing services from muscular dystrophy to hairlip to more ahtleticism, and eventually, more hair or a more attractive nose. The last two may take a while.

But what will be really interesting will be the tweaking of genes that fix cognitive issues. Again, its a matter of progression. Nobody – OK, almost nobody – will complain in a decade or three when Downs’ Syndrome is edited out of a fetus. From there, bringing a mildly retarded child to normal is a barely an ethical step at all. After that, well, perhaps someone destined to be of normal intelligence can be made smarter than average, or even a borderline genius along one or another dimension.

The timing of this whole process of enhancement will depend on its complexity and difficulty, and the difficulty of dealing with trade-offs that might exist. It is possible, but unlikely, that a single tweak of the genome will bring a noticeable leap in IQ. But it is more likely to require making a lot of small changes to the genome.

Timing also matters in and of itself. An evolutionary process may cause less social upheaval than a revolutionary process. Its one thing to go from cohorts with today’s intelligence to something we’d call a genius today over a period of a century or more. Its another to achieve that over half of a generation.

But regardless of details, its all coming. At some point there will be generations with large numbers of genetically edited young people. And they will be different. On average, they may have some combination of trait we deem desirable. These include athleticism, beauty, creativity, perseverance and intelligence. But those genetically edited people, however different, will also be the same as the rest of us in a few key ways. They will simply be individuals, trying to make their way through life as well as they can. They won’t be a single monolithic entity, and they won’t behave or think the same. They won’t have the same life trajectories. But like the rest of us, they will all be trying to make a living, and for some of them, their inborn traits will make it that much easier for them to outdistance the competition.

If there is one thing the very diverse members of the edited group will agree upon, it is probably this: there is no way in hell they’ll be voluntarily accepting handicaps Harrison Bergeron-style, to level the playing field. All of this is going to be painful to the un-edited who happen to be around at the time, and who may wish for such handicaps. They may even succeed in getting some handicaps required through strength of law or societal pressure.

Such steps to compensate for an uneven distribution of skills, talent and abilities will create winners, namely those given the leg up. But it will be a short-term, and harmful victory. Holding back the talented, or replacing them with those who are less gifted, simply slows development and innovation, and blocks the tide that would otherwise lift more boats.

(A final note: I guess if I were someone else I might have written the same essay about AI. However, having done some work on the outer edge of the distant periphery of the field, I just don’t believe anyone will be building anything that remotely resembles a self-motivated sentient machine in any future that is remotely foreseeable today. As a result, machines won’t outcompete people. People using machines, though, will outcompete other people, but that makes for a very different post.)

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Social Justice: Debt, Solidarity or Care?

by Peter Dorman (originally published at Econospeak)

Social Justice: Debt, Solidarity or Care?

Mozi: scholar and activist

How do we think about the obligation of social justice?  The dominant American political culture is based on individualist values: you have a right to do whatever you want, and the main problem is how to prevent you and other rights-bearing individuals from getting in each other’s way.  Without extra considerations, social justice in such a universe is a matter of taste and inclination, which is to say charity.  You offer help to others when you feel like it.

But there is an important extra consideration, debt: our freedom in an individualist world is constrained by obligations to repay the debts we have incurred.  This may result from a purely financial transaction like a mortgage or a student loan, but we also recognize what might be called social or moral debts, where one person has benefitted at the expense of someone else and therefore owes compensation in return.  This might not be recognized in a court of law, but it makes an ethical claim that can cause people to feel a sense of obligation.

The you-owe-it-to-them argument is used on behalf of coffee-growers, for instance.  Those on the sipping end of the industry, when they hear stories about how hard these growers work and how little they get for it, rightfully feel obligated to go out of their way to make amends.  They buy fair-traded beans and patronize cafes that share, or seem to share, these same values.  If you benefit by drinking, you are indebted.

Ta-Nehisi Coates, who I discussed in an earlier post, strongly pushes this framing of racial justice in America.  White people benefitted from centuries of un- and underpaid black labor, and from racial domination in general, and in this way they have accrued an immense debt.  Justice will not be achieved until the debt is acknowledged and paid back.

In fact, the “white privilege” language used to analyze racial inequality implicitly draws on this same notion of debt obligation.  Inequalities are assumed to all take the form of zero-sum relationships, where some (whites) have more because others (blacks) have less.  Thus the difference in outcomes can be understood as a debt that the better-off owe to the worse-off.  It’s politically effective insofar as it appeals to this deep theme in our culture, justice as the retiring of debts.

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Scenes from the September jobs report

Scenes from the September jobs report

On Friday I highlighted the difference between the results of the establishment survey and the household survey.  A 2006 paper from the BLS (pdf) explaining the differences in how jobs are counted in the two surveys shows us why:

Interviewers from the Census Bureau contact households and ask questions regarding the labor force status of members of the household during the calendar week that includes the 12th day of the month. The broad coverage of the CPS encompasses … workers temporarily absent from work without pay.


[In the Establishment survey, b]usinesses report the number of persons on their payrolls who received pay during the pay period that includes the 12th day of the month. Workers who did not receive pay during the pay period are not counted.

Thus an employee at, say, Barnacle Bill’s Seashore Restaurant, who wasn’t paid during the week of Hurricane Irma because the restaurant was closed, doesn’t get counted in the Establishment survey, but *does* get counted in the Household survey.

Thus, although the household survey is the smaller sample, and thus subject to much more noise, it probably gave us a much truer picture of the labor market for the whole of September.  While the employment gain itself (906 thousand!) was insane, and surely not accurate, the ratios of unemployment, underemployment, and participation in the survey probably picked up the true  trend of improvement.

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California’s New HIV Law

I’ve stated a number of times that in my opinion, the one positive thing you can say about Democrats is that they usually are marginally less offensive than Republicans. But this is is really, really bad:

Starting January 1, 2018, it will no longer be a major crime in California to knowingly expose a sexual partner to HIV without disclosing the infection. Gov. Jerry Brown signed legislation on Friday that lowers the offense from a felony to a misdemeanor.

So… human nature being what it is… what do you think will be the result of reducing the disincentives to knowingly emposing a sexual partner to HIV without disclosing the infection?


The California legislature passed SB 239 on September 11.
The law previously punished people who knowingly exposed or infected others with HIV by up to eight years in prison. This new legislation will lower jail time to a maximum of six months.
The new law also reduces the penalty for knowingly donating HIV-infected blood from a felony to a misdemeanor.
Bill sponsors Sen. Scott Wiener and Assemblyman Todd Gloria, both Democrats, argued California law was outdated and stigmatized people living with HIV, especially given recent advancements in medicine. Evidence has shown that a person with HIV who undergoes regular treatment has a negligible chance of spreading the infection to others through sexual contact.
“The most effective way to reduce HIV infections is to destigmatize HIV,” Wiener told CNN. “To make people comfortable talking about their infection, get tested, get into treatment.”

The piece goes on:

Many Republicans staunchly opposed SB 239, saying it could lead to an increase in HIV infections.
Sen. Jeff Stone voted against the bill and strongly expressed his disapproval in September when the Senate voted on it.
Stone, who is also a pharmacist, took aim at Wiener and Gloria’s argument that modern medicine can lower the spread of HIV. The senator said three out of four people who are on prescription medication in the United States do not comply with their doctor’s orders on how to take it.
“If you don’t take your AIDS medications and you allow for some virus to duplicate and show a presence, then you are able to transmit that disease to an unknowing partner,” Stone said on the Senate floor.
Sen. Joel Anderson, another Republican who voted against the bill, argued that people infected with HIV could never live their lives “to the same extent” again. He said it was irresponsible not to disclose the possibility of a life-altering infection.

Moving on:

The bill enjoyed support from Californians for HIV Criminalization Reform (CHCR), a coalition of several organizations, including the ACLU of California, whose mission is to replace the “stigmatizing laws that criminalize HIV status.”
Rick Zbur, executive director of Equality California — one of the organizations in the coalition — told CNN his group was “elated” that the governor signed the bill and changed the state’s “archaic laws.”
“This is an important bill that modernizes California’s HIV laws,” Zbur told CNN. “It will really advance public health and reduce stigma and discrimination that people living with HIV have suffered.”
The Los Angeles LGBT Center also supported the bill. The organization’s director of government relations, Aaron Fox, told CNN the new law will see HIV-positive people “treated fairly under California law.”

Apparently preventing people from knowingly exposing others to HIV stigmatizes people who have HIV and is unfair. No word on how the victims of such behavior feel.

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Which Senator Has Done the Most for World Peace ?

Many US Senators have contributed to preserving the peace. I am not a historian, but I understand that many admire William Fullbright. I personally think very highly of Ernest Gruening who tried to save the US from the Tonkin Gulf resolution and our involvement in the war in Vietnam.

However, I think it is now clear that the honor belongs to Senator Robert Corker (R-Tenn). Sen Corker is a respected and experienced statesman not prone to impulsive action. But more importantly, he controls no nuclear weapons.

Any day Trump spends insulting Senator Corker is a day he doesn’t get around to insulting Kim Jong Un who is a depraved and spoiled dictator with nuclear weapons.

I ask concerned citizens to help Senator Corker keep President Trump busy. “adult day care center” was enough for us to survive Sunday, but we can’t expect Senator Corker to bear the whole burden While Trump has a skin as thin as a DNA molecule (that’s thin) he also has the attention span of a meth addled gnat. It is our duty to work together to keep Trump pissed in our time.

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September jobs report: establishment survey stinks, but household survey rocks!

September jobs report: establishment survey stinks, but household survey rocks!

  • -33,000 jobs lost
  • U3 unemployment rate down -0.2% from 4.4% to 4.2% (new low)
  • U6 underemployment rate down -0.3% from 8.6% to 8.3% (new low)
Here are the headlines on wages and the chronic heightened underemployment:
Wages and participation rates
  • Not in Labor Force, but Want a Job Now:  down -216,000 from 5.844 million to 5.628 million
  • Part time for economic reasons: down -133,000 from 5.255 million to 5.122 million (new low)
  • Employment/population ratio ages 25-54: up +0.5% from 78.4% to 78.9% (new high) 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.0.09 from $22.14,  to $22.23, up +2.5% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Holding Trump accountable on manufacturing and mining jobs
 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise? 
  • Manufacturing jobs fell by -1,000 for an average of  +9,800 a month vs. the last seven years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
  • Coal mining jobs rose by 500 for an average of +133 a month vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month

July was revised downward by -51,000. August was revised upward by +13,000, for a net change of -38,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly flat.
  • the average manufacturing workweek was unchanged at 40.7 hours.  This is one of the 10 components of the LEI.
  • construction jobs increased by +8,000. YoY construction jobs are up 184,000.
    • temporary jobs increased by +5,900.

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Part of Patriotism is Paying Taxes

Part of Patriotism is Paying Taxes

As Americans, we pay taxes to allow our government to support important activities that we as individuals or individual businesses either can’t do at all or can’t do as successfully.  Both individuals and businesses benefit from government, so that paying taxes is a wonderful exercise in patriotism.

For individuals, the idea of paying taxes as patriotism may be obvious to many of us, because we think that taxes are an obligation of citizens to support and pay for the many things that the government does that we cannot do ourselves, from running a military defense system to supporting basic research into diseases, helping people and cities and states hit by natural disasters (like Texas and Florida and Puerto Rico), supporting education and research that leads to innovation and economic growth, helping to fund changeovers from dying industries like coal to new and growing industries like solar and wind, preserving areas of public lands for the public rather than allowing them to be decimated by private industry and fossil fuel extraction, preventing huge multinational companies from gouging consumers or polluting our water, land, and air, and the many other things that the government does for the benefit of all Americans.

But the far right in this country has been preaching the opposite for years.

  • There’s a good bit of hypocrisy there, because when Sec. of Health Price (now fired) or current Sec. of Treasury Mnunchin or current EPA Director Scott Pruit wants a comfortable private ride (like Pruitt’s many trips back to Oklahoma to talk to industry magnates one-on-one without any public information, and then de-regulate on their behalf), they love that they can make a slim excuse and take a military jet at the cost of hundreds of thousands of U.S. taxpayer dollars.   Or, like Pruitt, have a “sound-proof room” built for himself (first EPA administrator who thinks he needs it) so he can talk to his industry buddies about how to un-protect the environment without any Americans ever finding out about it.
  • Far right media personalities have made a killing by arguing for tax cuts (that mostly benefit the rich like them) and government shrinkage (of programs that they think they won’t use).
    • Grover Norquist wants taxes to be low because he wants to “shrink the government and drown it in a bathtub.”  That idea has proliferated on the right to many of the programs that are directed to help the most vulnerable amongst us, such as Medicaid, and to programs that exist to help ensure the Americans of all ages and backgrounds enjoy the right to access to health care and decent standard of living in retirement, through Medicare and Social Security. Not surprisingly, Norquist has stated that including a VAT in the U.S. system would be “like shards of glass on a pizza” (see this link) –even though almost every developed country has a VAT as well as an income tax (which is one of the reasons that the comparisons of corporate tax rates is so misleading–it is comparing apples (only an income tax) to oranges (an income tax AND a VAT and usually other taxes as well, such as financial transaction taxes).
    • Rush Limbaugh supports Trump’s tax-cuts-for-the rich ideas.  See “What I was Told About the Trump Tax Plan–and What I Think About It“, The Rush Limbaugh Show (Sept. 28, 2017).  He spouts one falsehood after another about them:  that they are not trickle-down (of course they are), that they aren’t harmful for the poor (of course they are); that they will allow 99% of Americans to file their tax forms on a postcard just because the framework reduces the number of tax rates (absurd:  reducing the number of tax rates  has just about nothing to do with reducing the complexity of the Code for the vast majority of American taxpayers, who already file a simple form because they have mainly wage income that is withheld at the source).  And  no matter how much Rush Limbaugh claims that reducing the corporate tax rate, creating a low tax rate for partnership pass-through income, getting rid of the estate tax and getting rid of the AMT aren’t benefits for the rich (because, he says, Trump has insisted that the changes aren’t supposed to benefit him), the fact is that they are benefits for the rich and the Trump clan clearly will especially benefit, probably to the tune of hundreds of thousands annually and billions upon Trump’s death.  Limbaugh is quite simply just plain wrong.  Because, you see, although rates matter (and we should have a top tax rate much HIGHER than our current top tax rates), the changes that the GOP Six are proposing in the framework are specifically intended to, and do, provide enormous tax cuts to the ultra wealthy.  That’s because the marginal statutory rate is just one piece–the real question is what gets taxed, i.e., how is the “taxable income” amount calculated and what special loopholes are built in to benefit the rich (like the 25% partnership pass-through rate).

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