Thursday, May 9, 2019

Mars Needs Women

was the title of a campy sci-fi/horror film of the the 1960s. Of course, Mars is a frozen, airless rock spinning in infinity and needs nothing.

China, on the other hand is a nation on Earth. In 1979, the Chinese Government adopted a policy of allowing, subject to certain exemptions, each family to have only one child. Wikipedia has a couple of relevant articles. Chinese people, have for various, social and cultural reasons, a strong preference for having boys. So it is not surprising to learn that: "According to the Chinese Academy of Social Sciences, there will be 24 million more men than women of marriageable age by 2020."

This is a problem. Marriage civilizes men. Unmarried men are constant source of disorder and violence. It has been hypothesized that in societies where polygyny is the norm, there is a problem with large groups of unmarried young men. They are often directed to military occupations where they have hope of booty and perhaps a woman to bring home. Even more than the rest of the world, the Chinese regime must worry about this phenomenon in modern China, as a potential source of political disorder in a state without democratic institutions.

Solving the problem is tough, especially when it is due to manipulation of the circumstances of birth. Start to birth more girls today, and the Chinese might have an adequate supply in 2035.  Military raids to steal women are another traditional method, but the risks of triggering a larger war are probably unacceptable. The slave trade was another path, but slavery has a bad name in the modern world.

It is therefore unsurprising to read that the Chinese have taken to buying brides from Pakistan.
"Pakistani Christian girls trafficked to China as brides" By Kathy Gannon and Dake Kang on May 7, 2019 at

GUJRANWALA, Pakistan (AP) — ... hundreds of poor Christian girls ... have been trafficked to China in a market for brides that has swiftly grown in Pakistan since late last year, activists say. Brokers are aggressively seeking out girls for Chinese men, sometimes even cruising outside churches to ask for potential brides. They are being helped by Christian clerics paid to target impoverished parents in their congregation with promises of wealth in exchange for their daughters.
* * *

In China, demand for foreign brides has mounted, a legacy of the one-child policy that skewed the country’s gender balance toward males. Brides initially came largely from Vietnam, Laos and North Korea. ... “It’s purely supply and demand,” she said. “It used to be, ‘Is she light-skinned?’ Now it’s like, ‘Is she female?’”

Pakistan seems to have come onto marriage brokers’ radar late last year. ... Since then, an estimated 750 to 1,000 girls have been married off ... Pakistan’s small Christian community, centered in Punjab province, makes a vulnerable target. Numbering some 2.5 million in the country’s overwhelmingly Muslim population of 200 million, Christians are among Pakistan’s most deeply impoverished. They also have little political or social support.

Among all faiths in Pakistan, parents often decide a daughter’s marriage partner. The deeply patriarchal society sees girls as less desirable than boys and as a burden because the bride’s family must pay a dowry and the cost of the wedding when they marry. ... By contrast, potential Chinese grooms offer parents money and pay all wedding expenses. ... They pay on average $3,500 to $5,000, including payments to parents, pastors and a broker ...

We are, of course, expected to be horrified by this gross violation of human rights. The article goes to the source: "Human Rights Watch called on China and Pakistan to take action to end bride trafficking, warning in an April 26 statement of 'increasing evidence that Pakistani women and girls are at risk of sexual slavery in China'."

I have expected to see all along. In that, it is sort of like the College Admissions Scandal, I commented on previously. China has too many men and not enough women. The Muslim countries of MENA and SEA have too many people and not enough capital. The logical thing for both sides is to trade women for money. This will cause white liberals in the EU/USA to have conniption fits, but their disapproval caries no weight in other parts of the world. I do not think that either Islam or Chinese philosophies have any deep seated objection to the idea.

Is there a glimmer of light at the Southern Border?

I have over many years come to despise Tom Friedman, who is the NYTimes lead op-ed columnist, unfailing fountain of pious liberal conventional wisdom, and pompous windbag. Early in his career, he was a reporter on the foreign desk, and as such spent several years in the Middle East. He wrote a book about the experience "From Beirut to Jerusalem", which I thought at the time was pretty good. After he took up residence in the Washington office he started writing bilge like "The World Is Flat". I stopped reading his stuff and I have been calmer, if not happier, since then.

Usually when his columns are linked on the websites that I attend to, it is to ridicule them. Typically with good reason as they are pious liberal conventional wisdom, expressed by a pompous windbag. I was prepared for the usual when I followed a link to: "Trump Is Wasting Our Immigration Crisis: The system needs to be fixed, but “the wall” is only part of the solution." by Thomas L. Friedman on April 23, 2019.

But, when I read this:

SAN DIEGO — On April 12, I toured the busiest border crossing between America and Mexico — the San Ysidro Port of Entry, in San Diego — and the walls being built around it. Guided by a U.S. Border Patrol team, I also traveled along the border right down to where the newest 18-foot-high slatted steel barrier ends and the wide-open hills and craggy valleys beckoning drug smugglers, asylum seekers and illegal immigrants begin.
* * *
The whole day left me more certain than ever that we have a real immigration crisis and that the solution is a high wall with a big gate — but a smart gate.

I said to myself, wow, isn't that almost exactly what Trump has been saying for the last six months? Who let Tom of off the ranch? Last time the subject of a wall came up Nancy Pelosi declared it to be immoral. so, I read on. Tom said that:

Without a high wall, too many Americans will lack confidence that we can control our borders, and they therefore will oppose the steady immigration we need. But for this wall to have a big gate, it has to be a smart and compassionate one, one that says, “Besides legitimate asylum seekers, we’ll accept immigrants at a rate at which they can be properly absorbed into our society and work force, and we’ll favor visa seekers with energies and talents that enrich and advance our society.” That’s the opposite of the unstrategic, far-too random, chaotic immigration “system” we have now.
That’s been a “system” in which millions of people could cross into our country illegally or overstay their visas. Or cross over and claim asylum and then melt into society while awaiting their hearings. Or bring in their family members through family reunification programs. And that’s no matter their possible impact on communities and social welfare resources or their ability to assimilate and contribute to society.

* * *
And in an era when more and more countries will fracture under environmental, population, criminal and technological stresses, we simply cannot take everyone who shows up at our border.

End chain migration. Accept legal immigrants on a rational basis. Revise the asylum system to only admit genuine cases of persecution. Limit the number of legal immigrants to the rate at which they can be absorbed. These are all propositions that Trump and most Republicans can accept.

Of course, Tom is writing for the NYTimes and he must sound the "Orange Man Bad" gong:
Instead, we’re stuck with a man who just exploits the border crisis and uses his “wall” to divide the nation and energize his base.
Or, as Frum put it: “The gratuitous brutalities of the Trump administration shock the conscience, and fail even on their own terms. Intended as deterrents, they are not deterring. They are succeeding only in counter-radicalizing liberal opinion to stigmatize almost all immigration enforcement against nonfelons as cruel, racist and unacceptable.”

I am not a huge Trump fan, but guys like Tom and Frum have spent the last few years criticizing Trump's rhetoric, not on the basis of what Trump said, but of what his Democrat and Media opponents have said that he said. Or, even worse, on the basis of what some drunk in the last row said. Further, Trump's rhetoric is off the cuff, and full of bombast and rodomontade, often humorous, and simply will not bear careful parsing.

But, Tom's exit is graceful:

In sum: we need new walls; we need a serious strategy for mitigating climate change and offering economic and governance assistance to countries to our south that are being destabilized by poverty and extreme weather; we need to rethink who is entitled to asylum, so people fleeing economic dislocation don’t overwhelm our borders and harden our hearts to people truly fleeing tyranny; we need to encourage legal immigration of people who can help our country thrive in the 21st century; and we need to partner with Mexico on a Mexican-American plan to manage the flow of migrants through Mexico to our border. 
None of these alone will work. Anyone who tells you otherwise has not been to the border.

If there were any Democrats in Congress who could bear the slings and arrows of their outraged base, Tom's column could provide the basis for legislation that would go a long way to resolving the crisis on the border. I think that they would be surprised to find that Republicans would work with them.

Monday, April 15, 2019

The College Admissions Scandal, Such As It Is.

They caught a bunch of parents using a “consultant” to bribe various college people, like soccer coaches, to get their little Olivias into “elite” colleges. (USC? are you kidding?).

I won’t wax moralistic. I don’t care. The world has real problems. Whether one one rich white kid goes to Ivy U and another one has to go to Cal State Northridge is of no concern to me.

I will say I told you so. For years I have said that there must be a way to payoff admissions people. It must be happening because there is too much demand, the system is too opaque, and the people who run it are low status (among their peers on college campuses) and not well paid.

Why didn’t those people go through the door of legal bribery via a donation to the colleges endowment? Easy. They are, for the most part, HENRYs (High Earnings Not Rich Yet). It takes a lot of capital to be able to peel off a 7 figure donation, which is what it takes. Five or six figures they can handle.

I think it is all about status anxiety. It is not enough to obtain high status for yourself, you must be able to pass it on to your children. You see, 300 years ago in Europe, status was conferred by inheriting lands and titles. That kind of status is easily given to your children.
In modern America status is conferred by things like having a role in a movie, being an elected official, being a partner in a big law firm. Those are very hard to give to children. And that makes parents very anxious.

The odds are that if you are in the right tail of talent, your kids will be closer to the mean (regression to the mean). Finding out that this is true is quite blow to the aspirations of the blessed.

One status thing that parents can give kids is children is a tuition at an “elite” college. All the kid needs to do is gut it out for 4 years. The evidence is that everyone who is willing to make a minimal effort to play the part, gets a sheepskin in 4 years no matter what.

So, yes the whole thing is upper class parents plagued by status anxiety trying to drag their children over the finish line. And the fight is entirely inside the upper class.

Elite Colleges — What do they do?

Many commenters, seem to be under the illusion that the highly rated colleges in this country have very smart students and who learn lots of really important stuff from the world famous professors at those schools. I think that is wrong.

In all but a few cases (Cal Tech), the “elite” colleges are where the bright, but not necessarily extraordinary children of the upper classes go to get indoctrinated into mores and crotchets of the ruling class. What is important is not reading any particular text or solving any particular mathematical equation. What is important is learning to be like the others, and not to be a bitter clinger, one of the deplorables, or what is even worse, some kind of a religious fanatic.

Why are the colleges failing to be what they want us to think they are?

First, the students are a very mixed bag.

A. Athletes. The schools, even the Ivy League, recruit a lot of athletes. They need to field a lot of teams, not just football and basketball, but soccer, lacrosse, track, and rowing, I have been told by reliable sources that upwards of 40% of the incoming class at some ivy league schools are recruited athletes. Now, those kids are not dummies, but most of them are ordinarily bright kids with decent grades and board scores. The real secret here is that like the colleges, the high schools have been inflating grades like Macy’s inflates balloons for the Thanksgiving Day Parade. It is very common to hear about ordinary suburban high schools where 15% of the kids are “valedictorians”. And the College Board has been dumbing down the SAT to fit the crappy educations the high schools are giving the kids for years.

B. Legacies. The schools know that Alumni whose children are rejected don’t donate. So they follow the golden rule: “money talks”. Again, the legacies are not dummies, but, see above about what their grades and board scores mean.

C. Affirmative action. Ideally the schools would like one eighth of the incoming class to be black and one eighth Mexican. They can’t do that even when they count the basketball players and football players. So they need some ringers, like African immigrant kids who work like Asian immigrant kids, and the children of white upper class Mexicans from Mexico.

D. Miscellaneous gets. Children of powerful politicians. Kids who have starred in Hollywood motion pictures. Children of really rich people who are not alums, but who will fork over now.

The bottom line is that about a quarter of the class is left for kids who will raise the average SAT score. Just make sure that less than half of them are Asian. So that is about ten percent of the class for smart white kids — just make sure they don’t need scholarship money. That goes to the A categories.

Second. The teaching is, if anything, even less to write home about. Ivy League professors are hired because of their research production. Teaching is, as far as they are concerned, a distraction. The really famous ones only teach a couple of graduate classes, which are focused on their research interests. The classroom experience for undergraduates is no better at Ivy U than it is at Kent State. Which is just fine as far as the students are concerned because class is just a distraction from their real interests which are binge drinking and fornicating.

What the kids graduate with is status. That is what their parents want to give them. The only fix is to pull the ‘elite” colleges down to earth.. It shouldn’t make any difference if you went to Harvard or 2 years at Plano CC followed by 2 more at UT-Arlington.

Admissions System

What makes the situation even worse is that the admissions system for elite colleges is not objective, not transparent, and not fair.

Admissions committees have neither the expertise nor the ability to conduct the kind of scrutiny that would expose cheating, nor the kinds that they claim to do and claim to want to do. It is all a charade. The problem is acute because of the increasing grip that elite colleges have on entry into the ruling class and media and financial elites.

The only possible way out of this bind is to remove control of the process from the colleges. Many educated people believe that admissions should be controlled by a third party testing authority as it is in many other countries. Their intuition is that such a system would be acceptable to everyone.
There are objective systems in Europe and East Asia, the kids take examinations such as the French Baccalauréat or the German Abitur. The tests are written essay type exams, and some of them are even oral. They are far harder to cheat on than the multiple choice parodies of examinations used in the US such as the SAT.

Testing wont work

A testing system would make many large and powerful political groups very unhappy. It is clear to me that a sufficient portion of the public, no doubt concentrated in certain groups, has rejected the very idea that testing can be fair or efficient. Check out the reaction created by the latest round of admissions to NYC public magnet schools. Stuyvesant High School admitted 895 students for fall 2019. Only 7 of them are black. But only 22% are white. Two thirds are Asian. The Mayor is very unhappy.

American parents are not prepared to find out that their precious snowflakes have skated through their inferior high schools without learning anything. And certain classes have not inculcated a love of learning among their children, nor have they called out the politicians and teachers unions who conspire against them.

None of these people will accept the verdict of a test or system of tests. They will fall for the siren song of demagogues who claim that the system is based on sexism, intolerance, xenophobia, homophobia, islamophobia, racism, and bigotry.

The only admission system I can think of that is objective, transparent, and fair is a random draw.
A lottery would be fair to everyone. No one could claim that they were handicapped by their race or the fact that they were limited by circumstance to poorly run and financed public schools. No one would be advantaged by being able to afford exam tutors, admissions consultants, social justice expeditions to third world countries, alumni donations, or participation in private school only sports like rowing.

People I have proposed this idea to have objected that the quality of those being educated would drop drastically.

Compared to the social justice warriors they are graduating now? The joke is that the so-called elite selective schools provide for most students (especially, the legacies, athletes, and affirmative actions) no better education that most second string State Us (e.g. Kent State, Western Kentucky. Eastern Michigan, etc.).

The engineering schools provide rigorous educations, but so do the engineering schools of the state universities. Besides, those programs are always self selective. Organic Chemistry has ended more medical careers than cocaine.

So what would the impact of an admissions lottery be on this system. The biggest one I can see is on the rowing teams. Do you have any idea how few rowers there are outside of New England prep schools.

As for the general intellectual level of the colleges. Meh. Yes, there would be a few non A category kids who were too stupid to get by. They can be pushed out pretty quickly, if the schools care, and I am not sure they do.

BTW, another thing that we will need to do is impose wage and price controls on colleges, so that they do not use pricing to scare away non-rich children.

Friday, September 7, 2018

Clearly, They Have Shot All of the Copy Editors

"A London Rental Reaches for the Stars: An observatory built for King George III to view a 1769 celestial event has been fully renovated and now seeks a renter at $41,600 a month."
By Ruth Bloomfield on Sept. 5, 2018 at
He was particularly enthused at the prospect of viewing the passage of the planet Venus across the face of the sun—a phenomenon that occurs less than once in a century—and commissioned an observatory from which to view this rare astrological event.

Astrology is the superstitious belief that the course of human events is determined by the locations of the  Sun, the Moon, the planets, and the stars in the sky as observed from the surface of the Earth. Astrologers tell fortunes by means of  charts they create using astronomical theories invented by the ancient Greeks and Romans which are geocentric and not based on modern physics. An "astrological event" is a manifestation of superstition.

 Astronomers are scientists who observe extraterrestrial bodies like the Sun, the planets, and the Stars and use mathematics and physics to deduce the nature of those bodies, Astronomy has existed since ancient times. In the eight century B.C.E., Babylonian astronomers determined when and where the planets would appear in the sky. In the 17th Century, Newton used observations made with newly invented instruments such as the telescope and new forms of mathematics such as the infinitesimal calculus he invented to explain universal gravitation and calculate the orbits of the Moon and the planets with new understanding and accuracy.

The "passage of the planet Venus across the face of the sun", is known among astronomers as a "transit of Venus". One of Newton's contemporaries, Edmund Halley (the comet guy)  proposed that telescopic observations of a transit of Venus could be used to measure the distance between the Earth and the Sun, which would provide a yardstick for measuring the distances and sizes of the Sun and the planets. Haley did that in 1716, but the next transits were not predicted to occur until 1761 and 1769.

Astronomers made careful observations of those astronomical events and determined that the earth lay ~95 million miles from the Sun (the correct figure is ~93 million miles). For the first time, men knew with certainty that the Sun and the planets were very far away, and that they could have no effect on the lives of men. Astrology was shown to be superstitious nonsense.

Wednesday, April 18, 2018

Not Completely Insane

 Two major points of my previous speculations are confirmed.

1. Pompeo is carrying the deal.

2. Denuclearization is a core tenet of the deal.

"Trump says Pompeo meeting with Kim Jong Un went 'very smoothly'" By Louis Nelson on 04/18/2018 at

“Mike Pompeo met with Kim Jong Un in North Korea last week. Meeting went very smoothly and a good relationship was formed,” the president wrote online. “Details of Summit are being worked out now. Denuclearization will be a great thing for World, but also for North Korea!”

Wednesday, April 11, 2018

More Dots to Connect

Here is one that I knew about but failed to mention in my post of April 7: A train purportedly carrying Kim Jong Un visited Beijing during the last week of March. I would conjecture that the Chinese took Kim to the top of a very high mountain, and showed him all the kingdoms of the world and the glory of them; and made him an offer he could not refuse.

Then, on April 8 it was reported that: "North Korea has told the U.S. that Kim Jong Un is prepared to discuss the denuclearization of the Korean Peninsula, clearing the way for a summit meeting between the North Korean leader and President Donald Trump ..."

Very interesting.

Saturday, April 7, 2018

Rank Speculation About Recent Devlopments

Here is a rumor of a foreign policy development that could have a dramatic domestic political impact.

A couple of weeks ago, I had lunch with a neighbor. He is in the military and has just returned from a tour of duty in Korea. His rumor is that the meeting between Trump and NORK dictator Kim will produce a peace treaty between the parties to the Korean War.

The terms of the treaty will include the denuclearization of the Korean Peninsula and the withdrawal of American forces from South Korea.

Yes, it is contrary to established policy, but Trump has no commitment to established policy. Further, it would fit Chinese policy.

I am sure that Kim does not want to give up his nukes, but, he will do as the Chinese say. Kim has absolutely no leverage in dealing with China. His guns point south and China is to his north. They can turn off the spigot and Kim’s army will have neither food nor fuel. Against us Kim has the population of Seoul as his hostages.

My concern is that China should pay a price for what would a very big win for them. The price should be backing down on several other issues:

1. China must give up claims that the South China Sea is its territorial waters. It must confirm the judgment of the court in its case with the Philippines.

2. China must agree that it will not use force or the threat of force to alter the political status of Taiwan.

3. China must accept changes in the terms of its trade with the US. Most especially, it must abandon the policy of requiring US companies to give intellectual property rights to Chinese joint venturers as a condition for access to Chinese markets. Other restrictive practices must be stopped as well.

Here is a reading of some not obviously connected recent events that may be pieces of the puzzle.

1. Trump fires McMaster and Tillerson. Pompeo is made SoS. The connection? The departed opposed the deal. Pompeo and Mattis have pushed the deal. They may have set the term sheet.

2. Trump imposes tariffs on US China trade. He may be pushing item 3 of the deal where China had been balky or foot dragging.

3. Trump makes nice to Putin, invites him to White House. The Korean War which will be ended by the deal was fought by the US, but the US was authorized and directed in the matter by the UN. The treaty must be approved by the Security council and Russia has a veto. Putin must be on board.

I am not enamored of Trump. He is not a naive genius at international affairs. He is very ADD. He never studies issues. And, I doubt that he thought this whole thing up. My guess is that the deal was first floated by Xi Jinping. Then, Pompeo and Mattis carried the ball over the objections of Tillerson and McMaster.

This is all rank speculation based on very little. But, if it comes to pass it will be a spectacular development in international affairs, and it will force a reset of the political atmosphere in the US. Large numbers of Americans on the isolationist right, and the pro-communist left would be thrilled. The narrative of an unstable sabre rattling Trump would be destroyed. It would boost Trump’s popularity ratings dramatically, and perhaps reverse the anti-Trump electoral trend of the past few months.

If it does happen, you read it here first.

Tuesday, November 28, 2017

Yes It's 75,000 Pages, But Most of It Is Irrelevant to You

The length of the Internal Revenue Code and the regulations, rules, forms, and instructions that come with it, while staggering, are not for the most part of any real concern to ordinary citizens. The IRC (Title 26 of the United States Code) consists of 11 Subtitles. Of that total, the only one that is of real concern to the average citizen is Subtitle A. Income Taxes. To be sure, if buy booze, you pay the excise taxes in Subtitle E. But, you do not have to know anything about them unless you own a beer distributorship, you lucky dog. Further, Subtitle A has lots and lots of material that most people know nothing about. E.G. "Chapter 3 - Withholding Of Tax On Nonresident Aliens And Foreign Corporations" The relevant stuff is in Chapter 1 - Normal Taxes and Surtaxes.

The irrelevance pattern is repeated recursively in Chapter 1. Most of what affects individuals is in Subchapters-A and B, but the list of Subchapters goes on to Y. You probably do not need to know anything about H-Banking Institutions or  L-Insurance Companies. Once upon a time, a very long time ago, in a previous millennium, I needed to learn about Subchapter K-Partners and Partnerships for professional reasons. Please believe me when I tell you there is a special place in the 10th circle of Hell for the man who wrote the 25 page, 11,198 word, explanation of three words in §704(b)(2): "substantial economic effect". But, once again, you can spend, a long, productive, and happy life in total ignorance of that abomination.

It is true that some of the few remaining sections that are relevant to ordinary individuals have developed into very long disquisitions. For example §163, that authorizes the deduction of interest payments, has grown enormously. In the 1939 IRC, the provision (§23(b)) that was ancestral to §163, was 58 words long and included a rule about tax exempt bonds that was later put in a separate section. In the 1954 recension, it was 3 subsections of 258 words. It is now 14 subsections totaling 6835 words.
Some of that verbiage was added is to alleviate taxpayer problems, such as a subsection that turned, as if by wizardry, mortgage insurance premiums into deductible interest payments for a few years. Other provisions were inserted to deal with possible abuses like bearer bonds*. And yet other provisions were added to deal with market developments. Today everyone lives off of consumer credit. but, the first bank credit cards were not issued until 1958. When the first versions of the IRC were adopted, the common assumption was that money would only be loaned and interest paid for business purposes. The invention and spread of consumer credit necessitated a rethinking of the treatment of interest payable on consumer credit. In 1986, as part of the extensive amendments adopted that year, subsection (h) was added basically to disallow interest on consumer credit.

I have little doubt that vast stretches of the existing tax code could be rewritten to clarify and simplify it. But, I doubt that anyone really cares about it that much. People who have to deal with it have learned it as it is, and would rightly question whether any change would destabilize the meaning of the parts they have to deal with. Any rewrite would leave substance of the provisions alone, and that is where the problems lie.

Note: The 74,000 page figure comes from  Wolters Kluwer, CCH the publisher of the "Standard Master Tax Guide" a series of loose-leaf volumes containing: the text of the income tax provisions of the Internal Revenue Code; excerpts of relevant Congressional Committee Reports; IRS regulations; and summaries of IRS rulings and judicial opinions. Much of that material accumulates from year to year, e.g. judicial opinions from the 1930s are still in there. In 2013 the exact number they gave was 73,954. Every month, they sent you more pages with the latest developments to insert at various locations in the binders. Many law firms and accounting firms had full time employees whose job it was to keep the binders up to date. I am sure that, by now, most tax professionals use an on-line version to save the difficulty and expense of maintaining that much paper.

*For those of you who are blessedly of too young an age to have dealt with bearer bonds, they were paper certificates payable to bearer, i.e. whoever showed up at the issuer's place of payment and surrendered the piece of paper. Interest on the bonds was evidence by tiny post-dated checks (called coupons) printed on the paper, which were also payable to bearer. To cash them in you cut them off of the paper bond, and submitted them to the issuer for payment. The taxing authorities had to depend on the honesty of taxpayers to find out how much interest they received in a year. People who derived most of their income from cashing the interest coupons were called: "coupon clippers". Such people seldom clipped cents off coupons from the Sunday paper to keep their family's grocery budget in line.

Saturday, November 18, 2017

Tax Cuts

I am sorry, but we can't afford them. The Federal government needs revenue desperately. Its present and future obligations, both for bonded indebtedness and for entitlements (Social Security, Disability, Medicare, Medicaid, Obamacare, etc.), exceed its revenue producing capability as the current tax system is configured. Further, the US must rebuild the armed forces it has squandered so wastefully both by use and by abuse such as the F35 and the Zumwalt destroyer.

The deficit in the recently ended fiscal year* (FY 2017 ended 9/30/17) was $666 Billion Dollars, which was 3.5% of the GDP. Of course the deficit was financed by issuing bonded indebtedness. At the turn of the century, the US Government ran surpluses for the FYs 1998 through 2001. FY 2001 ended 30 September 2001 -- just 3 weeks after 9/11. FY 2002 began a string of deficits that peaked in FY2009 when the Panic of 2008, and the political panic spending in its wake, produced a post WWII record deficit of 1.4T$ (pseudo-scientific notation here, T stands for Terra or Trillion), but the string has not ended. The four year period, FY 2009 through FY 2012 saw 5T$ of deficits. Since then we have settled down in the 500G$ range.
*A Fiscal Year of the Federal Government begins on October 1 of the previous calendar year. FY 2017 began on 10/1/2016 and ended on 9/30/2017.

The GDP is about 20T$.  So is the gross Federal Debt. You could say that we have reached the point where the Debt equals, and soon will exceed, the size of the economy. But, only about 15T$ is in the form of outstanding bonds that are owned by persons who are not agencies of the Federal Government, mostly Social Security*. As such, the bonds owned by the Federal Government in so-called "Trust Funds" are just promises to keep paying SS pensions, medicare benefits, etc. even though the payments exceed the payroll tax revenues that have funded them for most of the past 80 years. (CBO is currently projecting that will happen in about 10 years).
Note: the CBO Web Site has lots of very informative reports and data. Their budget projections are here. Spend enough time with that stuff, and you will join the late, great B.B. King in singing: "I've got a mind to give up living, and go shopping instead, buy me a tombstone, and be pronounced dead") It is that depressing. Who is the CBO? The Congressional Budget Office, a supposedly non partisan body created and tasked by Congress with tracking the budget and Federal finances and explaining to Congress the cost of its folly. They do excellent work.
While we are at it, I should add some links to web sites that track the Debt and the deficit: U.S. Debt Clock National Debt of the United States Truth In Accounting. If you really want to wallow in it try: Financial Report of the United States Government
*The Federal Reserve banks own another big chunk of the total Federal Debt (~2.4T$), but economists and budget nerds regard that as being held by the public because the it is the  backing for all of those nice crispy Federal Reserve Notes in your wallet. What? You don't have any? Don't look at me, I haven't any either.
The optimistic political line is that the debt can continue to grow indefinitely as long as the economy grows faster. And this is true, until it isn't. The larger the debt is in relation to the economy, the more difficult it is to service. The nightmare scenario is that the interest on the debt starts to compound above the growth rate of the economy and simply compounds to the sky.

One might say, that only the publicly held debt represents an obligation that must be repaid. Much of it is owed to foreigners who might get testy if they are not paid. Especially the Chinese, who own about 3T$ of bonds and a whole bunch of ICBMs. But, even though Congress could lawfully stiff the beneficiaries of Social Security and Medicare, it is absolutely inconceivable that they could or would politically.

If Congress cannot not pay, then perhaps we should think of those obligations as being ones that we should recognize upfront. Truth In Accounting linked above says that the National Debt should really include 76T$ in future obligations of the Social Security and Medicare programs.

Economists Laurence Kotlikoff and Alan Auerbach, have claimed that the relevant number is what they call the Fiscal Gap which is the difference between the present value of all of government's projected financial obligations, including future expenditures for Social Security and Medicare and servicing outstanding official federal debt, and the present value of all projected future tax and other receipts. They have pegged this amount to be in excess of 200T$.

Further there a few trillions of dollars of debts owed by agencies or instrumentalities of the Federal Government, such as the alphabet soup of mortgage lenders that floats the price of houses far beyond the ability of the mass of homeowners to afford*, such as Fannie Mae (Federal National Mortgage Association or FNMA), Freddie Mac (Federal Home Loan Mortgage Corporation), Ginnie Mae (Government National Mortgage Association), and FHA. These entities have issued trillions of dollars worth of bonds and mortgage guarantees. If they were subsidiaries of private companies, the SEC would make the parent companies include their operations in its financial statements. but, the Federal Government doesn't have to do that. Why? Because they don't want to, and they do not want to scare the peasants.
*In the early 1970s, the median price of a house was less than 3 times the median annual household income. The median Family, i.e. the middle class, could afford the median house. During the inflationary period of the 1970s the ratio went up to 3.5 In the 1990s it went to 4. After 2002 it took off until it hit 5 at the peak of the housing bubble. During the Panic of 2008, it dropped back to 4.5. But fear not. The bubble has been re-inflated and the average is now almost 5.5. You have nothing to worry about, it is as safe as houses. If you want to learn more go to Political Calculations. He has lots of interesting, but not comforting information.
If you are inclined to whistle past grave yards, you can point to the example of Japan, which has a publicly held debt of about 250% of its GDP. I really doubt that the US could get away with that for a a few reasons. First, the Japanese people are thrifty, and they have not run a trade deficit. Therefore, almost all of the Japanese Government bonds are domestically owned. Second, those bonds pay very little interest. Even the 30 year bonds pay less than 1%. US 30s pay about 2.8%, which is low, but not that low. Third, Japan has an extraordinary amount of social cohesion and trust. The US is closer than most of you think to a shooting civil war.

Another comeback is that the US Government cannot go broke because it can print the Dollars it needs to pay off its obligations. The response to that is yes, it can. But, how much will those Dollars be worth. If they are so abundant as to be worthless, we have hyperinflation. Welcome to Argentina. Or worse, Wiemar Germany.

Here is the way I see it. The Federal Debt is too large, and we are running large deficits even though this is a time of relative prosperity. The bigger the debt and the deficit are, the smaller our margin for error and unforeseen events is. There could be a worldwide recession not caused by the United States. War is always a possibility. We did not foresee the collapse of the Soviet Union, or 9/11, we may not foresee the next war.

Risk of a truly catastrophic event, like the collapse of the Federal Government is asymmetrical. If it doesn't happen, we go on from day to day suffering the slings and arrows. Some people say that we should throw down the Federal Government because it is corrupt and oppressive. But, history suggests that such an event is far more likely to cause enormous chaos and suffering than to lead to a happy solution. Louis XVI called the Estates General because he was out of money. What followed should be a cautionary tale for us. I have already mentioned the Soviet Union and Wiemar Germany. Bad examples abound. Happy endings are rare.

Prudence suggests that this is a good time to get our financial house in order.

What follows are statements from pundits who have said good and prudent things about tax cuts. First Robert Samuelson from the liberal Washington Post:

Under-Taxed America
November 9, 2017

WASHINGTON -- We Americans are having the wrong debate. Almost all the arguing over the Trump administration's proposed tax cut centers on two issues. Will the tax reduction stimulate faster economic growth? And is the proposal too generous toward the wealthy and too stingy toward the middle class and poor?

Interesting questions, to be sure -- but mostly irrelevant to the nation's long-term well-being.

The truth is that we can't afford any tax reduction. We need higher, not lower, taxes. What we should be debating is the nature of new taxes ..., how quickly (or slowly) they should be introduced and how much prudent spending cuts could shrink the magnitude of tax increases.

To put this slightly differently: Americans are under-taxed. We are under-taxed not in some principled and philosophical sense that there is an ideal level of taxation that we haven't yet reached. We are under-taxed in a pragmatic and expedient way. For half a century, we haven't covered our spending with revenues from taxes.

Of course, there are times when borrowing (that is, budget deficits) is unavoidable and desirable. Wars. Economic downturns. National emergencies. But our addiction to debt extends well beyond these exceptions. We have run deficits with strong economies and weak, with low inflation and high, and with favorable and unfavorable productivity gains.

Since 1961 ... federal budgets have been in surplus in only five years. ...

Based on present policies, it's doubtful that things will get much better. Aging baby boomers are inflating Social Security and Medicare spending. ... the Congressional Budget Office projects that the budget deficit ($666 billion in 2017) will grow as a share of the economy.

* * *

The unspoken assumption that justifies big and continuous deficits is that -- rhetoric to the contrary -- they pose no serious danger to the economy. We can run deficits forever without suffering ill effects. ...

Excessive federal borrowing poses three theoretical dangers. First, it could raise interest rates and "crowd out" the private investment essential for higher living standards. Second, it could trigger a financial panic, if private investors would no longer buy Treasury securities except at exceptionally high interest rates. And finally, a large national debt could make it harder for the government to borrow heavily during a true crisis.

* * *

But that's not us. By now, it must be obvious: We are no longer responsible. The urgent need is to plug the huge gap between government spending and tax revenues. Naturally, we aren't doing that.

Next Robert VerBruggen from the conservative National Review:

Cutting Taxes with Borrowed Money: Will a growing debt eat away at economic growth?

November 9, 2017

* * *

The House GOP’s new tax bill would reduce revenue by almost $1.5 trillion over the next ten years, according to the Joint Committee on Taxation (JCT). ...

Normally, the argument against raising the deficit is put in simple terms — by whatever party is out of power, of course. Our debt is already about 77 percent of our GDP, a number that will rise to 91 percent by 2027 under current law and will only get worse from there. Realistically speaking, this is going to force a combination of tax increases and entitlement cuts at some point in the future, and the longer we wait, the more brutal those measures will have to be. Starting from such a precarious position, we have no business making our deficits even worse, whether by cutting taxes or by increasing spending. ...

But there’s an additional layer of complication to the debate over tax cuts funded through higher deficits, one amply illustrated in competing studies of the GOP tax plan from the Tax Foundation and the University of Pennsylvania’s Wharton School. The former says the plan would boost economic growth and create jobs, and that as a result we would lose significantly less than $1.5 trillion in revenue. The latter, by contrast, says the bill would have essentially no long-term effect on the economy.

*    *    *

We’ll start with the Tax Foundation. The organization predicts “3.6 percent higher GDP over the long term, 3.1 percent higher wages, and an additional 975,000 full-time equivalent jobs.” Furthermore, it projects that the “after-tax incomes of all taxpayers would increase by 4.4 percent in the long run,” a benefit fairly evenly distributed across the economic spectrum.

The group says the plan will reduce tax revenue by $1 trillion when economic growth is taken into account. Interestingly, without accounting for growth, it pegs the revenue loss at almost $2 trillion over a decade, higher than the estimate from the JCT. (The gap apparently stems from some differences in the data and assumptions the two groups use in their modeling.) This means the Tax Foundation foresees enough economic growth to create $1 trillion in federal revenue, and to cut the total revenue loss in half.

That huge gain doesn’t come from the reforms to the individual income tax. In fact, the Tax Foundation estimates those reforms’ effect on economic growth at zero. Instead, “the larger economy and higher wages are due chiefly to the significantly lower cost of capital under the proposal, which is mainly due to the lower corporate income tax rate.” The statutory corporate rate would fall from 35 percent to 20 percent under the plan, putting the U.S. roughly in line with the average for other developed countries.

... the CEA wrote, “by lowering the user cost of capital and making more investments profitable, multinational corporations and foreign capital can be attracted to invest in the U.S. economy.”

*    *    *

The Tax Foundation’s analysis is more or less what conservatives have had in mind when pushing “dynamic scoring,” as opposed to the old “static scoring”: Tax cuts benefit the economy, and a stronger economy means more tax revenue, so tax cuts “pay for themselves” to some significant degree (if not entirely).

But it turns out two can play at that game. The Penn Wharton study is dynamic, too, and its results are shockingly different. It finds that there would be some economic growth by 2027 -- but not much: GDP would be a whopping 0.33 to 0.83 percent bigger. ...

Why do the GOP’s tax cuts fail to boost the economy in Penn Wharton’s analysis? ... The simplest way to put the argument ... is this: When the government borrows money ... people will lend the government money that they otherwise would have invested in the American private sector. Thus the deficit “crowds out” private investment, counteracting the pro-investment effect of cutting the corporate tax.

This is hardly settled science. A Congressional Budget Office paper in 2014 rounded up the literature and reported a “high degree of uncertainty”: “For each dollar’s increase in the federal deficit, the effect on investment ranges from a decrease of 15 cents to a decrease of 50 cents, with a central estimate of a decrease of 33 cents.”

The Tax Foundation doesn’t even model this effect. “While past empirical work has found evidence of crowd-out, the estimated impact is usually small,” it contends in the new report. “Furthermore, global savings remain high, which may help explain why interest rates remain low despite rising budget deficits.” ...

Penn Wharton ... points out that “since the year 2000, foreign savers purchased about 40 percent of annual increases in Treasury security issues impelled by higher federal deficits” — implying the rest had to have come from U.S. savers, who most likely would have found other domestic investments otherwise.

*    *    *

First, even in the Tax Foundation’s more optimistic analysis, the bill would reduce federal revenue by $1 trillion over a decade. So Republicans should stop pretending that they won’t be making the debt significantly worse if they continue down this path. If they think it’s a good trade to hike the debt in exchange for (hopefully) boosting the economy, they should make their case openly.

And second, the uncertainty around economic growth is important in itself, because it means we need to plan for numerous possible outcomes.

Thursday, November 9, 2017

Italian Spice Meatballs

Ground Meat
1 lbs.
Whatever you like. 
I used turkey

1 T Red Wine

¼ cup olive oil
This depends on the meat. 
The Turkeywas 2% fat
and needed some oil.


Bread Crumbs
1 cup
Depends on meat and fat. 
The Turkey,eggs, and oil
were very runny

1 t Kosher

1 t

Ground Black Pepper
1 t

Red Pepper Flakes
1 t

1 t

4/6 cloves, crushed

1 cup chopped & sauteed

1 t

1 t

Fennel Seeds
1 t

In a mixing bowl. (I used our Kitchen Aid mixer on the lowest speed.) Start with the eggs and the liquid. Start mixing. Add fat, and onions. Then meat and garlic, followed by salt, sugar, spices and herbs. Add bread crumbs until you get a texture you can form into balls.

Form the mixture into balls. I made 15 about 2” diameter. Cover the bottom of a baking pan with a small quantity of olive oil. Place the balls in the oiled pan.

Bake 40 minutes in a medium oven. Turn the balls over hallway through. 

Serve with pasta in a marinara sauce. 

Note: I use a free hand with spices and herbs. More is not a big problem.