Saturday, September 30, 2017

The New Civil War In The Republican Party

Steve Bannon and his alt-right media organization Breitbart News are leading an effort to take over the Republican Party.  It is one of several fringe organizations that have found a home in the GOP.  It is like the Tea Party and the Libertarian Party in that respect.  While it shares many of their concerns, under Steve Bannon it will emphasize white nationalism and its connections to economic populism. The focus of this article is on the 2018 elections. They were encouraged by the GOP primary in Alabama. Their candidate spent $200,000 in its primary campaign and defeated the candidate supported by the Senate leadership who spent $10 million on his campaign.  He was also supported by Donald Trump's lukewarm endorsement. Both of the candidates claimed allegiance to Trump. Bannon's organization intends to sponsor candidates who will oppose incumbent Republicans in GOP primaries.  They will feed off of the GOP failure to repeal Obamacare and run candidates who will attack the GOP leadership in Congress.  That is a winning strategy for them in two ways.  It will drive incumbent candidates further right or it will replace them with their own candidates. 

The civil war within the GOP may provide Democrats with a better opportunity to win some seats in the 2018 election.  That does not bother Bannon's organization.  His goal is to take over the Republican Party.  He hoped to accomplish that by putting Trump in the White House.  Trump was not able to promote Bannon's objectives because he depended upon the GOP Congress to repeal Obamacare.  Bannon's goal would be to put Trump in charge of his brand of Republicanism.  Trump cares little about GOP orthodoxy.  He would be perfectly happy in a White House which had Bannon supporters in Congress.  He keeps selling economic populism to his base while yielding to Republicans who have no interest in economic populism. 

Its not clear about how this civil war will turn out.  Its not even clear why a billionaire who supported Trump, and has contributed to many GOP campaigns, is backing Steve Bannon. However, this will not be good for the Republican Party.  It has been difficult for the Republican Congress to deal with their current divisions.  That last thing that they need is more division within their ranks.

Friday, September 29, 2017

How Trump's Tax Plan Distributes Cuts By Income Class

The non-partisan Tax Policy Center  did an analysis of the tax plan that Trump is selling as a plan to benefit the middle class.  He also claimed that he would not benefit from the plan.  Most of the benefit from the tax cuts go to the top 1%.  It would also increase the federal debt by $2.4 trillion.  Paul Ryan loves this kind of plan and he will try to sell it Congress.  His plans typically include an assumption that the tax cuts will pay for themselves (Which is false) by growing the economy.  The huge increase in federal debt will not exist in his analysis.  It is assumed away by growth that will not happen.

Watch Donald Trump Elicit A Boo About John McCain During Alabama Speech

This article is by a Republican who grew up in the South who cannot understand how we got to this point.  A draft dodger works up his audiences to boo a war hero.  We have a lot of work ahead of us.

What Should We Take Away From Ken Burns' Lessons About Vietnam?

I have only seen a couple of the Vietnam episodes.  I have copied the entire series to view at my leisure.  Ken Burns was asked many questions in this interview.  The series ended with the Beatles singing "Let It Be".  He tried to explain why he ended the series with that song by the Beatles.  The quote below, from the end of the interview, caused me to think about the point that Burns wanted to make.  I have having been having a hard time dealing with the current threats to our system of governance.  At times it seems like the impossible dream that our founders had at the beginning our journey as a nation has been lost.  I am trying to replace cynicism with skepticism about our nation and our democracy.  It has not been easy.  I keep reading the quote below from the Burns interview:

And we’ve tried in some way, in a little tiny bailiwick, to say, you know, here’s the alternative to that kind of cynicism — a kind of healthy skepticism. We’ve put all of the facts to an extraordinary test, both a scholarly one, an artistic one, a human one, in the course of doing it and we’re very confident that it will hold up. But also mindful that it will also provoke in people on both ends of the spectrum really negative reactions, because they want to see things only one way and will adhere to that binary sense that they are right and everybody else is wrong.
 Donald Trump is our current Vietnam.  Hopefully, my concerns  about our system which enabled my fellow citizens to put Trump in the White House will not lead to cynicism.  A healthy skepticism may be more productive.  We have a better understanding of the disease but it will take a lot of work to develop a cure.

Trump's Billion Dollar Lie About His Tax Plan

Donald Trump gave a speech in Indiana to sell his tax plan to his Vice President's home crowd.  He insists, contrary to all analyses of his proposal is that his plan was designed to benefit the middle class.  To support that claim he told the audience that he, and billionaires like him,  would not get any benefit from his proposed changes in the tax system.  That lie was easy to disprove (like most of the lies that he tells every day).  This NYT article examines the only copy that we have of Trump's tax returns.  It shows that he would reduce his income tax by $31 million by eliminating the Alternative Minimum Tax.  The big change in the tax code, and the biggest lie, is the elimination of the estate tax. Most Americans don't know much about the tax code and Trump assumes that he can lie about the estate tax.  He has a good reason to lie because eliminating the estate tax would provide Trump with a billion dollar benefit.  He defends the elimination of the estate tax, which Republicans call the "death tax", by arguing that it prevents small business and farmers from passing on their hard earned assets to their heirs.  What he doesn't say is the there is no estate tax on the first $11 million of a household's assets.  Only a small fraction of Americans have to pay the estate tax because the great majority of small business people, and small farmers, don't have assets above $11 million in their estates. Donald Trump and many of those who fund Republican campaigns do have estates valued above $11 million.  Forbes estimated Trump's assets at around $2.6 BILLION several years.  The estate tax would reduce his estate by $1 billion.  Trump did not dispute the Forbes estimate of his assets. In fact, he complained that his assets were greater than their estimate and that he should have a higher spot on the Forbes list of the richest Americans.

Trump and his fellow Republicans keep repeating the lie about the estate tax because most Americans no very little about inheritance taxes for a good reason; they don't have substantial assets to leave to their heirs.  They are unaware of the $11 million dollar deduction from their assets upon death.  Donald Trump understands this; he takes great advantage of his ability to use his "fog machine" to distract us from important issues and focus our attention on disputing each of them that we receive on a daily basis.  He did not become a billionaire without a good set of skills that hucksters require.

Trump's tax attorney said that Trump's second wife was more involved in his tax return than he was.  Trump hired a good attorney to keep his taxes down.  He is also getting a lot of help from his top economic advisors in selling their tax plan.  Trump's job is to leave most of the tricky chicanery to his economic team.  He is only the huckster that sells the plan to his loyal followers.  It can't be easily sold to people who are well informed about the tax code.

Thursday, September 28, 2017

Why Tax Cuts Don't Typically Produce Growth

Bruce Bartlett was on the Ronald Reagan team that developed his economic plan.  It was a classic Keynesian plan that Republican's fight against when Democrats are in office.  That is, taxes were cut and government spending increased. That producing budget deficits.  The economy grew according to plan.  Unfortunately,  Republicans have created a myth about the positive effects of tax cuts that is with us today.  Bartlett explains why the Reagan plan was well suited for that period and he reminds us that Reagan raised taxes towards the end of his presidency in order to reduce the rising federal budget deficit.  Bartlett provides us with some important data that may be useful in countering the tax cut myth:

*  Growth in real GDP during the high tax period preceding Reagan was 37.2% versus 35.9% following the Reagan tax cuts in the 1980's

* The Fed set interest rates very high in the 1980's to deal with extremely high inflation rate.  The Fed cut interest rates by half after reversing the inflation rate.  Lower interest rates played a big role in producing GDP growth.

* Wage growth slowed down in the Reagan era.  The distribution of income shifted more than the growth in the economy following the Reagan tax cuts.

* One of the implications of the tax cuts myth is that increasing taxes would slow down GDP growth.  Clinton increased the top tax rate and real GDP growth under Clinton was 37.3% versus 35.9% in the 1980's

* Following Clinton, George W. Bush made deep cuts in the top tax rates.  Real GDP growth under Bush was only 19.5%

* Obama increased the top tax rate and the stock market expanded by 10,000 during his administration.

Bartlett concluded that tax cuts can be useful under certain economic conditions.  However, they should be done following the typical process that is time consuming but productive.  Forcing a cut in taxes by the current process that failed to produce a good healthcare bill is the wrong way to go,

Populists In The US Elected A President To Cut Taxes For Billionaires

The Donald campaigned as a populist who would make life better for lower income citizens.  He would drain the swamp in Washington and punish the elite establishment that has ignored the interests of ordinary Americans.  We have heard that story before and we should not be surprised by The Donald's tax plan.  He has rewarded his base with words about social values that his base loves to hear.  They love to hear how much he shares their social values but his tax plan does nothing for them.  In other words, it is a tax plan developed by the Republican elite that is designed to reward their richest donors.  The plan is not fully fleshed out, but the 400 wealthiest households in America would have their taxes cut by an average of $5.5 million.  Some crumbs will be dispersed to lower income Americans, but the plan was designed to reduce the tax burden of people just like Donald Trump.  Of course, the tax plan is not being sold as a gift to billionaires.  It is being sold as a way to stimulate economic growth and to create jobs.  If you think that you have heard that story before you are correct.  It is a fairy tale that Republicans have been promoting since Ronald Reagan.  Tax cuts for the rich have done little to spur economic growth and create jobs.  Unfortunately, too many Americans are willing to accept nice words from politicians in support of their cultural and social values in return for rewarding the rich with dollars.

The other problem with the tax plan is that federal tax receipts will be substantially reduced.  Republicans who pretend to worry about federal budget deficits when Democrats are in the White House have been silent about increasing federal budget deficits.  If asked, they will repeat the fairy tale about paying for the tax cuts with economic growth, but they hope that the question will not be asked.  They also won't tell you that large budget deficits provide a good argument for cutting programs like Social Security and Medicare.  They also won't tell you that reducing taxes for wealthy Americans redistributes the tax burden to middle class citizens.

Wednesday, September 27, 2017

Meet The Recent Republican Nominee For The Alabama Senate Race In 2018

Roy Moore was backed by Steve Bannon and he defeated the Republican senator who replaced Jeff Session.  Moore was twice removed from State Supreme Court for violating the US Constitution.  He believes that the Bible should be held in a superior position to the Constitution because the Constitution was based on the values implicit in the Bible.  His interpretation of the Bible is shared by many evangelical Protestants.  Almost half of the population in Alabama share his beliefs.  Moore believes that the US is a Judea Christian nation and that other religions, like the Muslim religion, should not be tolerated.  He also incorrectly stated that some US communities run under Sharia law.  He will make a great senator.

Trump's Candidate Loses To Bannon's Candidate In Alabama Primary

Donald Trump backed a candidate supported by Mitch McConnell in the Alabama primary for the seat vacated by Jeff Sessions after his Attorney General appointment.  Steve Bannon and his alt-right organization backed a more conservative candidate.  Bannon's candidate won the primary by a large majority.  It appears that Trump's support is not enough to influence election outcomes.  His base is fueled by resentment against the "Washington elite";  That is why the voted for Trump in the first place.  Now he is part of the GOP establishment that was unable to repeal Obamacare.  The Civil War in the GOP is alive and well.  Some Republican incumbents have decided not to seek reelection.  Billionaires like the Mercers, who supported Trump, are supporting a challengers to the GOP incumbents in a Tennessee senate primary.  Nobody really understands how this will turn out.

Our Biggest Banks Don't Make Their Profits By Funding Corporate Investments

If you pick up an economics textbook you will find a completely wrong description of the banking system.  The banks are supposed to take the savings that we send to them and lend our savings to businesses which invest the funds to grow their businesses.  Only 15% of the funds received by our largest banks are funneled into corporate investment.  The remainder goes into the buying and selling of financial and real estate assets.  80% of those assets are owned by 20% of the population.  The major purpose of the large banks is to generate more wealth through financial services. 

There is a good reason why the large banks do what they do.  Its also the reason why graduates from our top universities seek jobs on Wall Street.  The financial industry captures 25% of the corporate profit base with only 4% of the corporate employment base.  Small community banks with only 13% of our savings provide most of the lending to small businesses.  It also explains why non-financial services corporations are copying their model.  Large corporations derive five times the revenue today that they got from financial transactions in the 1980's.  Financial engineering has become a much bigger part of their business.  Some of the large corporations in Silicon Valley are even underwriting bonds with their unused profits.  Our largest banks are the tail wagging the dog. 

Tuesday, September 26, 2017

A Republican Intellectual Explains Why The Republcan Party Will Disappear

Republican intellectuals are having a tough time in the Trump era.  Many of them believe that Trump is an anomaly and that their party will recover from Trumpism.  This Republican disagrees for good reasons.  His argument makes sense to me.  Many of my Republican friends are old fashioned Republicans who believe in free markets and individualism.  Most of them still vote Republican because they have high incomes and Republican politicians promise to cut their taxes.  They are also well educated and they do not identify with Trump's populist base.  The problem, according to the author of this article, is that the Republican Party has become the party of white nationalism.  Donald Trump proved that by trouncing the cream of the Republican crop in the GOP primaries. Ted Cruz thought that he could win the nomination with support from his evangelical base.  Trump crushed him by feeding evangelicals a strong dose of white nationalism that blended well with their belief system.  Trump is a skillful demagogue who was smart enough to understand the values and concerns held by majority of Republicans. 

The Republican Party and Trumpism are identical.  The party will collapse because a party based upon white nationalism cannot survive. The majority of Americans do not identify with white nationalism. Old white nationalists are dying off and they are being replaced by folks who look a bit different.  Our major corporations can't compete in world of white nationalist consumers or employees.  Globalism needs to be tamed down and work for more of our citizens but it cannot be reversed.  Nationalism is inconsistent with global market system.  Our large corporations get half of their revenue from more rapidly growing developing markets. 

How Russian Ads On Facebook Helped Trump

The Trump campaign used social media, outlets and alt right media, to exploit cultural issues in its political campaign.  Russian advertisers used the social media to exploit the same cultural divisions.  They were also effectively targeted to swing states in the election.  Clinton was heavily favored in the election because she was expected to win the electoral college votes of states like Wisconsin and Michigan which she lost to Trump by an extremely thin margin.  She would have won the election if she and won the rust belt states. 

Bernie Sanders beat Clinton in the Wisconsin and Michigan primaries.  His populist message was will received in the rust belt.  Russian ads in those states exploited the controversy made public by the hacks in the DNC website which showed that the DNC favored Clinton.  The ads were not were not designed to promote Trump; they were designed to discourage suppress Democratic votes in the rust belt states.   The turnout for Clinton in those states was well below the turnout for Obama in the 2012 election. 

The Russian ads and the Trump campaigns social media ads also exploited divisive cultural issues.  The list of these issues is well known.  Trump is still running the same campaign from the White House.  The Black Lives Matter issue was extensively used along with its counterpart Blue Lives Matter.  Terrorism is a real concern for everyone but concerns but Trump and the Russians used ads to increase the fear of Islamic terrorism.  Trump positioned himself as the superior protector from terrorists.  Immigration issues dovetailed with terrorism fears,  and the exploitation of white nationalism.  They also worked well with Trump's promises to promote American jobs by erecting trade barriers. 

This article also shows how the business models of Facebook and Twitter enable the exploitation of cultural issues at low cost.  When a media issue goes viral millions of users receive a message that cost very little to sponsor.  The cost per user is much lower than ads on TV which do not target a specific audience.  The social media also have the advantage of anonymity.  Unlike traditional media, in which ad sponsors are apparent,  Facebook does not reveal ad sponsorship.  US voters had no idea that Russian ads or Trump ads were sponsored by them.  They even did a good job of creating individuals who did exist as sponsors of their ads.

David Brooks Argues That We Need To Replace The Culture Trump Destroyed

David Brooks came of age in the late 1960's.  Abbie Hoffman, Jerry Rubin and others generated outrage about the dominant Protestant culture that had emerged following the second world war.  David Brooks was part of the dominant culture that was destroyed.  He helped to found the Young Americans for Freedom organization.  It was a conservative organization of college students who resisted the culture that formed during the late 1960's.  A new establishment emerged which embraced  economic, social and moral individualism.  It was a well educated establishment that included Hillary Clinton on the center left and conservatives like Brooks on the center right.  The new establishment was good for its followers, but it left everyone else out.  It gave us the Iraq war and the media, music and film industries disrespected those were not part of the new elite.

Brooks provided us with his version of cultural history in order to explain the rise of Donald Trump.  He argues that Trump is a buffoon like Abbie Hoffman and Jerry Rubin who created the outrage that destroyed the culture that preceded them.  He stuck his thumb in the eyes of the educated elite and was elected to office by the disrespected class that had been left behind.  His divisiveness has created a planet of independent and competing cultures.  Our job for the next 20 years is to establish the new culture that will replace the old culture that Trump helped to destroy.

Brooks argues that Trump, like Abbie Hoffman and Jerry Rubin, uses the attacks against him to fuel the outrage and disrespect that enrage his populist supporters.  He may be correct. However, Trump is unlike Hoffman and Rubin in an important way.  They had no position in our society outside of their notoriety.  Donald Trump is our president.  He has the power and authority of the authority of the government behind him.  Moreover, the cultural war that Trump inherited has been underway for a long time.  It began with Richard Nixon's decision to bring the folks who love Trump into the Republican Party.  The Republican leadership will have to decide how to deal with Trump.  It won't be easy for them.  Without Trump's populist base it is a minority party.  However, by embracing Trump they are losing the support of the educated class.  There is no place in today's world for a nation that is led by Trump's base.  They will be better served a more enlightened educated class that is readily available.  We need to fix our democratic system that has been systematically weakened by a segment of the educated class motivated primarily by greed.

Sunday, September 24, 2017

How Trump May Help To Strengthen Our Democracy

The Donald has certainly made an effort to weaken democracy in the US.  His attacks on democratic institutions and our political norms have been somewhat effective.  He has normalized many things that we had considered inappropriate in the past.  This article argues that this has backfired.  Trump's violations of norms has created a powerful incentive to renormalize many of our values.

Trump's efforts to destroy our free press may have strengthened it.  The press had been guilty for many years of false equivalence.  There were always two sides to every story and the press avoided taking one side over the other.  Our major institutions have responded to Trump's rants about the "fake media" by taking sides against his him and his policies.  Subscriptions to the NYT and the Washington Post have risen dramatically in response to Trump's efforts.  Efforts are also underway to make it harder for the social media to spread false information.  Many one issue organizations have also banded together to fight a common enemy.  Trump's attacked many of them to stir his populist base.  They are stronger than ever by joining forces against Trumpism.  The woman's march against Trumpism inspired other groups to march against their common enemy.  Scientists, who are typically apolitical, have marched against the "alternative facts" that are a critical part of Trumpism.  Counter protests against white supremacists and neo-Nazi's forced many Americans into the streets to rally against them.

Trump's efforts to repeal Obamacare have also worked against him and Republicans who supported him.  The Tea Partiers have been unable to come up with a plan to replace the bill that they have been taught to despise.  In many ways they have shown that they lack the ability to govern.  They have been given a chance to govern with control of Congress and the White House, but they have no ideas that they can sell to most Americans.  They can't even agree within their own party.  Hopefully, some Republicans will respond by changing their spots.  We need a thoughtful and responsible Republican Party but it has been systematically damaged by providing a path to Trumpism.  Trump took the worse elements of conservatism and turned it against them.  Many conservatives have jumped the ship.  They won't become Democrats but they now realize that there is more to life than criticizing Democratic policies.  Its far more important to join forces with Democrats to oppose a common enemy and to focus on governing within a two party system.

We have taken democracy for granted.  We have been systematically undermining democracy for many years.  Trumpism may have inspired us to defend it against Trumpism and authoritarianism.

LeBron James Tweets "U Bum" To Trump's Insult Of Stephen Curry

The Donald played the race card during one of his incoherent speeches in Alabama.  Ostensibly, he was there to support a candidate in the GOP primary, but he decided that Alabama was a great place to further divide the country.  Steve Curry declined an invitation to the White House extended the Golden State Warriors after they won the NBA championship.  The Donald decided to disinvite Curry to the White House even though he had snubbed The Donald's invitation.  He didn't stop with his attack on Curry.  He criticized NFL players who knelled during the playing of the national anthem at the start of football games.  He said that they should be fired.  He also scolded the NFL for reducing violence by penalizing players for hitting too hard.  The NFL responded to evidence that many of its players suffer from brain damage due to head injuries suffered during games by penalizing hits to the head.  The Donald said that football fans don't want a less violent game.  He claimed that NFL attendance is down because games are less violent.

The Donald's remarks serve his purpose well.  They will strengthen his hold on his white identity supporters as well as those who believe that violence plays an important part in their lives.  He also wrapped himself up the American flag with a false narrative.  America is a place that protects citizens who protest government policies they believe to be unfair.  The Donald played the patriotism card to discourage protests by black athletes primarily because of the way his base has responded to protests like "Black Lives Matter".  The Donald may, or not be, a racist.  He is without doubt a politician who has milked white identity sentiments to build his political base.  This did not fool LeBron James.  He understands racism when he sees it.  The Donald understands why he won Alabama with a larger margin than he did in any other state in the presidential election.

The Donald also has no claims on patriotism.  He insulted John McCain when it served his purpose by claiming that being shot down and serving as prisoner of war was an undeserved form of patriotism.  The Donald avoided military service by getting friendly medical doctors to proclaim that he was unfit for military service.  It had nothing to do with his "small hands";  his flat feet prevented him for serving in the military. Like many people, I have argued that The Donald is not presidential.  He has gone beyond that.  He is one of the most despicable example of human being that I have ever seen.

Friday, September 22, 2017

The Battle Within The GOP Over Trump's Tax Plan

Donald Trump wants to pass the largest tax cut plan in US history.  His plan calls for tax cuts that amount to $1.5 trillion over the next ten years.  His plan is gathering support within the GOP but there are many issues within the GOP.  Conservatives love cutting taxes so that they can reduce the size of government.  They would like to reduce government spending by one dollar for every dollar that is cut from federal taxes.  They usually back this up by being deficit hawks.  They insist upon spending cuts in order to avoid federal budget deficits.  They like to run against their Democratic opponents in elections by proclaiming that the GOP is the fiscally responsible political party.

The Trump administration is more interested in cutting taxes than it is in fiscal responsibility.  It uses a trick that Paul Ryan has typically used to justify tax cuts for GOP donors.  Trump is following the Ryan example by using dynamic scoring to access the effect of tax cuts on the federal budget.  Dynamic scoring is based upon the premise that each tax cut dollar produces an additional dollar of tax revenue.  That happens because tax cuts stimulate economic growth which produces additional tax revenue.  That has not happened in the past when Republicans passed large tax cuts.  Most economists don't have much faith in "dynamic scoring" based upon historical evidence.

Ordinarily, Congress uses the CBO and other non-partisan government sources to evaluate the impact of tax cuts on the federal budget.  Donald Trump does not want an impartial analysis of his plan to deliver the "Huuuugest" tax cuts in US history.  He wants to use "experts" in the White House to use dynamic scoring magic to justify his tax cuts.  He will have to convince House conservatives to go along with his plan but he will get a lot of help from Paul Ryan in the House.  They may have to throw some spending cuts into the plan to please conservatives.  The Graham-Cassidy healthcare plan may serve that purpose.  It includes large cuts to Medicaid which may satisfy House conservatives.

Its also possible to pay for tax cuts by eliminating deductions that are used to reduce taxable income. This includes things like state income taxes, local property taxes, corporate interest taxes, charitable contributions etc. etc.  Each of these deductions has strong supporters.  Its much easier to rely upon dynamic scoring to defend tax cuts.  Its also easier to cut taxes for the super rich without reducing the top tax rate on ordinary income.  The Trump tax plan will probably include a way for LLC's like the Trump Organization to use a device that avoids taxing their profits at the higher personal income tax rate as they are under current law.

The Graham-Cassidy Bill Is Standard Republican Practice

The Republican senate may pass a healthcare bill that is based on deception and lies.  It is also extremely cruel to millions of Americans who will lose insurance coverage.  Paul Krugman does not mince any words in his critique of the bill.  He describes the deceptions and lies and he is not surprised that the Republican Party will try to pass the bill before the CBO finishes its analysis of the bill.  The president will sign the bill, if it passes, without even reading it.  It does not matter to him that the bill does something that he has publically opposed.  The bill allows insurance companies to reject applicants with pre-existing health conditions.  Trump will declare victory, and the Republicans running for election in 2018 can tell their base that they have repealed Obamacare. They will also ignore the warnings from healthcare providers and insurers about disrupting the largest industry in America. Winning elections, by any means, is their primary motivation.  They have been doing that for years and Trump is their enabler in the White House.  Few of the Republicans, who will vote for the bill, understand what is in the bill.  They have no interest in governing.  Its all about winning elections by dividing the country.  Our founding fathers knew that this could happen, and they took steps to prevent it from happening, but too many of our politicians place party over the national interest.  The Republican Party excels at that.

Wednesday, September 20, 2017

Beneath A Benign Surface Of A Merkel Victory The Far Right Has Gained Influence In Germany

Merkel is headed for an easy victory in the German election and Alternative For Germany will not get a large share of the votes.  The easy victory for Merkel obscures what is happening in German politics according to this article.  The far right Alternative for Germany Party is complaining because many of their opposition parties have been coopting many of their ideas.  The entire German political spectrum has shifted to the right.  Political correctness is under attack, and even the left wing party has moved to the right on immigration and refugees.  Trumpism is alive and well in Germany even though Donald Trump is very unpopular in Germany.

Candidate Trump Shows Up To Deliver UN Speech

Trump's speech at the UN was written by Steven Miller, who along with Steve Bannon, packaged Trump as the "America First" presidential candidate.  The UN exists to bring nations together to deal with issues that cannot be settled by any single nation.  Trump's speech was not intended to promote the UN's role as a deliberate body able to solve complex issues.  He declared that he would put America's interest first and that all nations should behave as he does.  Who needs the UN???  Certainly, Trump's base does not need the UN.  His speech was intended to show his shrinking base that a powerful president in the White House is all that they need.  Trump continues to behave like the presidential campaign candidate that Miller and Bannon created.  He has no idea about how to behave like a president.

Tuesday, September 19, 2017

Donald Trump Shows How to Use Every Opportunity To Glorify Himself

Our president shows how to use Twitter to sell himself.  He sent out tweets in which videos of him speaking about important events demonstrate his importance.  He took advantage of natural disasters in Texas and Florida to feature himself coming to their rescue.  He used his address at the UN to show himself as the change agent that will make the UN successful.  Moreover, the UN headquarters are lucky to be right across the street from Trump Tower.  He gave a speech honoring the anniversary of a military organization to feature himself of its leader.  If anyone is interested in his personality disorder (narcissism), Trump provides a classic example of the disorder for all of us to observe.  A lot of Americans know enough about the disorder to understand its dangers and they know that it cannot be reversed.  Unfortunately, we put one in the White House.  Narcissists are often successful.  It energizes them and their energy is attractive to many voters who feel left behind.  Usually, potential demagogues are exposed during political campaigns.  Trump was exposed, but mistakes that would have destroyed most political opportunists, were ignored by too many voters.

Monday, September 18, 2017

David Brooks And Neil Irwin Disagree About Rising Inequality

David Brooks and Neil Irwin published op-ed's in the NYT which tell different stories about income inequality in the US.  Neil Irwin approaches the story by examining the impact of a broad trend in corporate America.  For the last few decades corporations have operated by focusing on their core competencies and by using independent contractors to satisfy their non-core labor requirements.  He tells this story by comparing two janitors.  One janitor was a full time employee of Kodak many years ago and the other janitor works as a contractor for Apple.  David Brooks found a way to dismiss the problem of rising inequality by reporting that capitalism is working just like it is supposed to work.  Median household real income in 2015 grew by 5.2% and it grew by 3.2% in 2016.  That was faster than the growth in productivity combined with the inflation rate.  He dismisses the idea that we have an inequality problem.  Instead we have a productivity problem.  We should take steps to improve the growth in productivity instead of redistributed income.

David Brooks seems to be primarily worried about politics in the US.  Left wing Democrats, like Bernie Sanders,  want to deal with inequality by redistributed income.  Right wing populists under Donald Trump have focused on reducing immigration and trade agreements in order to reduce income inequality.  He argues hat we need a resurgence of moderate politicians who will take steps to improve productivity which is the real problem in our economy.  This is consistent with many of the recent op-eds that Brooks has published.  He has been making a case for moderation in our politics and in the way we think about complex issues.  We don't need radical ideas to deal with rising inequality if slow growth in productivity is the real issue.  In a way that gives Brooks something to write about since Trump became the leader of the Republican Party.  His career had been based upon supporting conservative Republican policies.  One of the economic  assumptions in conservative ideology is that there is a close relationship between worker productivity and compensation.  Executives and lower level employees get paid in accordance with their contribution to output.  Executive pay has been rising faster than non-executive pay because of faster growth in executive productivity (whatever that is).

Neil Irwin's story is less about economic ideas, such as productivity, which nobody really understands, and its relationship to compensation.  He also takes a long term look at changes in corporate management practices which have changed considerably over the last few decades.  Median household income increases over the last two years is less revealing about rising income inequality than the steady rise in income inequality over decades.

Irwin compares the careers of janitor at Kodak, and a janitor at Apple, to make his point about the new management theory and how it contributes to income inequality.  The janitor at Kodak was a full time employee of Kodak.  She received healthcare benefits, paid vacation and she participated in Kodak's pension plan.  She also had an opportunity take a training program that prepared her to advance to a better job within Kodak and eventually outside of Kodak.  This was not atypical. Major corporations considered all of their employees to be assets and they bragged about the size of their workforce.  The janitor at Apple is a contract employee who does not participate in Apple's healthcare plan, its retirement plan or other benefit programs that are provided to core employees.  Moreover, Apple is not likely to provide its contract employee an opportunity for a more senior position at Apple or elsewhere.  Social mobility is reduced along with employee compensation.  Overall, between 1989 and 2014 contract employees received 20% lower wages than full time employees of the hiring firm.

During Kodak's heyday, prior to digital photography, it employed enough middle class employees to create two generations of middle class families in Rochester, NY.  That changed after the move to digital photography and it shows in Rochester today.  It is no longer a wealthy city with a large and prosperous middle class.  On the other hand, Apple has not contributed to the development of a middle class in Cupertino.  Its core employees are highly paid and they have driven up housing prices in Cupertino.  The median home price in Cupertino is $1.9 million.  Apple's janitor cannot afford to live in Cupertino.  Apple and other high tech employers in Silicon Valley also require a smaller number of employees to generate revenue and profits.  Kodak, IBM and AT&T required three times the number of employees than the three tech giants in Silicon Valley to generate 27% less revenue.  That is because companies like Kodak had to produce an additional role of film to generate marginal revenue.  The tech companies can generate revenue without creating an additional product.  They prosper by getting new users to use their network services.  It doesn't cost Google anything to provide an additional click to an user which adds to its advertising revenue.

In summary, we don't know why real median household income increased in 2015 and 2016.  It could something simple like more full time work by household members in response to economic growth. It's certainly not time to ignore the decades long discrepancy between productivity growth and wage growth and conclude that the distribution of income is no longer a problem in the US.  Wages are determined by corporate management decisions.  Those decisions are consistent with the prevailing management philosophy that contracts out for non-core employees in order to decrease total compensation costs and improve profits.  Contract employees are treated as commodities which should be purchased at the lowest price.  Core employees are a critical resource that are well compensated and have opportunities for upward mobility.  The use of contract employees is not restricted to occupations like janitorial services.  For example, consulting companies, that provide information technology services to major corporations, are able to do much of their work by networking to places like India where the work can be done at lower cost.  IBM, which has a large services business, has close to same number of employees in India as it has in the US where its workforce has been shrinking for years.

Saturday, September 16, 2017

Some Reasons To Enjoy Our Fearless Leader "The Donald"

Bret Stephens has enjoyed watching conservatives in Trump's applause factory respond to the deals that he made with the enemy party.  He is a brilliant writer and he has captured the moment well.  Conservatives may actually have believed the promises that he made to screw people who don't read their books or listen to their nonsense when they are provided with a platform. Stephens is enjoying their pain.  He has helped me to enjoy it as well because he understands the moment and he puts it into words that we can relish.

In addition to the picture that he provides of their squirming,  Stephens understands Trump well and he has described his personality to a tee.  They are dealing with a politician who does not share their ideals.  He has no ideals of his own.  He lives by the moment, and he reacts to each moment to squeeze some kind of advantage that he perceives at that time.  That is how he deals with his neurosis.  He has doing that most of his life and it has worked for him much of the time.  After all we elected a neurotic to the presidency.  Perhaps that's the best thing that we can do while he self destructs.  We can enjoy the pain and confusion that he has inflicted on conservatives who were stupid enough to trust him, or who believed that he would repent and rejoin them in the next moment.  They made a deal with a neurotic and they deserve to suffer from it.

Thursday, September 14, 2017

Larry Summers Explains Why Government Spending Must Grow

One could agree with libertarians that government has been spending too much and that it should be cut.  Larry Summers argues that government spending has been based upon a set of values.  Unless those values have changed government spending must increase for four reasons.

* We have assumed that government has a responsibility to assist the elderly.  The elderly share of the population is rising.  Therefore government spending must rise unless we revalue care for the elderly.

* Inequality has been increasing,  The share of income going to the top 1% has increased by 10%.  If we attempted to decrease the impact of rising inequality by only 25% it would cost government 2% of GDP

* The costs of education and healthcare have been growing faster than GDP.  Government spending must rise as the cost of those services rise.

* The ratio of US spending on defense has been declining relative to China, Russia and Iran.  US spending on defense must rise faster than defense spending by our rivals in order to prevent an erosion of our relative military capability.

Summers concludes that large tax cuts that are under consideration would be ill advised unless our values have changed dramatically in a libertarian direction.

Is Trump Our First White President?

A well educated and successful friend raised an interesting question among a group of my friends last night.  Essentially he asked how a political novice, and an accused womanizer, become our president.  Trump's character, and his ability to govern, are so far from our expectations of a president that it is a difficult question to answer.  Perhaps the most popular explanation for his electoral success is that he understood the needs of working class Americans and their resentment of the elite class better than his Republican opponents in the GOP primary, and better than Hillary Clinton in the general election.  The Republican elite and the Democratic elite have been tone deaf.  Clinton preached social justice to an electorate that wanted solutions to their economic problems.

This article reaches a different conclusion.  It will be difficult for many Americans to accept.  It argues that Trump won the election by appealing to white racism.  Trump's campaign began well before the 2016 election.  He started out early by declaring that Obama was not a legitimate president because he was not born in the US.  The majority of Republicans in 2016 continued to believe that Obama was not a legitimate president even after Obama released his birth certificate.  The Republican leader of the Senate declared that his primary objective was to make sure that Obama would be  a one term president.  Its normal for leaders of one party to oppose the leader of the opposing political party. Its not normal to have the level of partisanship directed towards Obama and his policies.  For example, his hated healthcare plan, which Republican's called Obamacare, was fine when the Republican Governor of Massachusetts, Mitt Romney, passed a similar plan in his state.  Romney believed that providing a solution for healthcare in Massachusetts would pave the way for him to pursue the presidency.  Instead, he had to defend himself against the easy comparisons between his plan and Obamacare.  In a sense, he lost access to one of the most potent Republican political weapons.

The data from the 2016 election illustrate the dominance of race in the election:

* Clinton expected that she would do well with women against a womanizing Trump.  Trump won a 9% margin of white women over Clinton.  However, his margin among white men was 31%.  Being a woman candidate was somewhat helpful to Clinton but not enough to overcome the margin provided by white males.

* Clinton did better with college educated white voters.  Trump had a 3% margin among college educated whites.  Non college educated whites gave Trump a 37% margin.  Education level reduces the racism affect.  Perhaps that is why higher education is so often attacked by Republicans.

* Trump's margin among white voters aged 18-29 was only 4%.  His margin among older white
 Americans was in double digits.

* If only white votes were counted in the 2016 election, Trump's electoral vote margin over Clinton would have been 387 versus 81.  68 votes would have gone to another candidate or to other.

* White voters earning less than $50,000 gave Trump a 20% margin.  However, he had a 28% margin from white voters earning between $50K and $100K.  His margin was only 14% from voters earning greater than $100K.  (The higher earning group is also a higher educated group) However, its hard to argue that Trump's victory cam be explained by his appeal to impoverished white votes.

Most of us do not want to accept the role of race in the election.  Democrats prefer to differentiate voters by class.  They would like to believe that they could win future elections by winning the votes of low income white voters as they had done in the past.  Its much harder to accept the idea that race is more important factor than economic class.  Trump's victory seems to prove otherwise.  Democratic appeals to social justice fell on deaf ears for many Americans.  Social justice means giving government hand outs to minorities for many Americans.

Tuesday, September 12, 2017

Young Voters Are The Democratic Base But They Are Not Democrats

Howard Dean, the former head of the Democratic National Party wrote an interesting article on the Democratic Party.  They voted for Clinton in 2016 but it was largely an anti-Trump vote.  Trump represents ever thing that they hate.  The Republican Party may have lost a real opportunity with young voters by electing Trump.  They share most of the values of the Democratic Party but they do not regard themselves as members of the Democratic Party because they are also distrustful of our politics and our institutions.  The Democratic Party was shaped 40 years ago by people like Howard Dean. Young people are more economically liberal than Dean's party.  He argues that it needs to be reshaped to turn them into members of the Democratic Party.

It will not be easy attract to young people into a political party, but there is little chance that they will become Republicans.  They can't figure out how to succeed with him, and they worry about how to proceed without the support of his base.  Trump feels free to humiliate the party leadership in Congress by threatening a rebellion by his base in the coming elections. 

Why Did Steve Bannon Say That Trump's Decision To Fire Comey Was A Terrible Mistake?

Steve Bannon was interviewed by Charlie Rose on 60 Minutes.  One of Bannon's comments, that did not make the final cut to the TV show,  is discussed in this article.  Bannon believes that Trump's decision to fire James Comey was one of the biggest political mistakes in modern history.  What did Bannon mean by that statement?  Bannon had already stated that was not aware of any collusion between between the Trump campaign and Russia. Therefore, he must believe that Trump might have set the stage for an obstruction of justice charge, or "something else".  Since the firing of James Comey led to the appointment of a Special Counsel, Bannon may be concerned about the "something else" issue.

The fact that the Special Counsel is looking broadly into the case suggests that digging into Trump's financial history will uncover incriminating financial dealings that could bring down his administration.  Bannon probably understands why Trump refused to release his tax returns and he is aware of Trump's dependency on foreign lending arrangements which might make him susceptible to blackmail and other forms of foreign influence.

Monday, September 11, 2017

Let Them Eat Social Culture Is Part Of Trump's Cling To Power

During the French Revolution citizens were begging for bread.  The queen responded to their pleas by saying "let them eat cake".  This article describes the many changes in the Trump administration that offers social culture changes in lieu of real economic change that Trump promised during his campaign.  Trump promised economic growth and high paying jobs during his campaign.  His economic policies are not designed to deliver on his promises.  They are pretty standard elite Republican policies.  That is, cut taxes for the rich and cut spending on social welfare programs like healthcare.  Trump called the GOP healthcare bill "mean" but he intended to sign it anyway.  It was more important to him to get a victory than the generous healthcare program that he promised his supporters.  He was not even able to give them a Pyrrhic victory by repealing Obamacare.

The Republican Party has typically offered social culture to its base in return for economic policies that favor the super rich.  The Trump administration is doing a much job of staffing up to deliver a much more conservative social culture to the GOP base.  That may compensate for his failure to deliver the economic benefits that he promised.  The GOP base seems satisfied with a strong diet of social culture.  The French monarchy was not as lucky as Trump has been with his "revolutionaries". 

Sunday, September 10, 2017

China Joins UK And France To End Sale Of Internal Combustion Vehicles

The UK and France decided to ban the sale of internal combustion vehicles by 2040.  China has the largest market for motor vehicles in the world.  It has taken steps to end the sale of internal combustion vehicles in the near future.  It also provides incentives to consumers to purchase electric vehicles.  This will reduce oil imports, and help China to meet its 2030 emissions goal.  Honda announced plans to develop an electronic vehicle for the China market along with a domestic manufacturer.  Since the Chinese market is the largest motor vehicle market in the world, its decision will accelerate the development of the electric vehicle market and speed up the demise of gasoline driven vehicles.  This will stimulate the development of the infrastructure that is required for electronic vehicles and it will require changes in the automotive service market as well.  It will also be good for our planet.

Friday, September 8, 2017

Why Texas And Florida Welcome An Active Federal Government

The Republican Party is unable to govern because libertarians in the party view the government as the enemy.  The party prospered during the Obama administration by doing whatever it could to keep the government from functioning.  Now that it controls Congress and the White House the anti- government wing of the party has forced Trump to rely upon Democrats to get anything done through his Republican Congress.  The natural disaster in Texas and the pending disaster in Florida has demonstrated how important an active government will be to their recovery.  Unfortunately, anti-government ideology, especially in Texas, made the disaster worse than it would have been if Houston had done a better job of regulating land use.  Natural disasters in Texas and Florida have also become more destructive over time because of global warming.  Libertarians,  have joined forces with the fossil fuel industry to prevent the government from doing what is needed to deal with the human contribution to global warming.  The libertarian gospel cloaks the narrow self interest of the energy industry with the garment of freedom which protects us from tyranny.  

This article makes a good case for a more active government to deal with a rapidly changing world.  Its hard to argue against that argument.  However, that argument assumes a good government that operates in the best interest of its citizens.  It has become much more difficult to attract and elect the right kind of people to government.  For example, too many of our elected officials ran for political office by denying global warming.  They did not get into political office by accident.  Donald Trump's decision to reject the Paris Accord was no accident.  It was an important part of his campaign platform because millions of Americans believe the propaganda produced by those with the means to misinform the public.  Donald Trump has proceeded to destroy the EPA, and he appointed a Secretary of Education who helps the Heartland Institute, which gets much of its funding from the energy industry, to distribute teaching materials to science teachers in our public schools which claim that the scientific community is wrong about the human contribution to global warming.  The Heartland Institute found three global warming denialists to make its case with specious arguments.  Their salaries came from funds provided by the energy industry and libertarians.

How Facebook And Twitter Provide The Means For Cyberwarfare

Researchers have gathered a lot of information about the ways in which Facebook and Twitter were used during the last election.  They are being used today in Europe to influence public opinion.  Its hard to identify fake accounts and bots from real Twitter accounts.  Some turn out to be real accounts in which a real person was influenced by fake accounts.  This article provides examples of fake accounts and a few real accounts.  It also describes the activity of businesses that sell real accounts that are not in use by the original owner.  Facebook and Twitter provide the means for cyberwarfare. It is difficult for them to provide a source for the exchange of legitimate information without enabling the most lethal form of propaganda in human history.  Educating our citizens to be better consumers of digital information may be our best defense in an era of sophisticated cyberwarfare.

Thursday, September 7, 2017

How Well Is Macron Performing In France?

This quote provides one answer about Macron's presidency:

Mr. Macron’s success in June’s presidential election has shaken up the moribund political landscape in a deep and lasting way. For that, he deserves thanks. But as a political project, Macronism is little more than rhetoric and hubris, backed up with conventional neoliberal policies. For now, Mr. Macron is still the darling of the global liberal elite, but his growing unpopularity gives us a better picture of what he has to offer
This is a link to the full article.

Trump Sides With Democrats On Fiscal Policy

Donald Trump surprised everyone by striking a deal with Democratic leaders in the House and Senate.  The deal extended the pending government debt limit from the end of September to December.  It was paired with funds for the damages from Harvey in Texas.  The deal surprised Paul Ryan who is the Republican Speaker of the House and Mitch McConnell who is the Republican Majority leader in the Senate.  Ryan criticized extending the debt limit to December.  McConnell was totally surprised that Trump did the deal without his knowledge with Democratic leaders.  Ultimately, McConnell added billions in spending to the deal for the likely damages in Florida from hurricane Irma.  Although Ryan and McConnell were blindsided by Trump's deal with Democrats, the biggest losers in the deal were far right conservatives in the House and in the Senate.  They prefer to use the government debt ceiling rule to win concessions from the government on spending cuts.  This deal extended the debt ceiling to December but it did not include spending cuts.  The basic goal of the Freedom Caucus is to reduce the role of government in society.  The easiest way to accomplish that objective is contain government spending, especially on programs that they don't like.

Freedom Caucus leaders have been in discussions with Steve Bannon who has left the Trump administration to head Breitbart News which preaches far right ideas to the conservative base.  Trump may have to deal with the loss of support from the far right which helped him to win the election.  On the other hand,  Trump is totally opposed to reducing the role of government in many of the areas opposed by his far right base.  He also has no ideological commitment to a limited government,  In fact, he wants to invest billions in an infrastructure plan that will not set well with the Freedom Caucus. 

Trump's bipartisan deal with Democrats underscores the divisions within the Republican Party.  Opposition to the healthcare bill from conservatives led to a defeat for Trump when he expected to announce a victory.  Not a single Democratic senator voted for the healthcare bill which was extensively crippled by conservative Republicans.  That required McConnell to get almost all Republican senators to vote for the bill,  John McCain sunk the bill when he joined two other Republican senators in voting against the bill.  Trump may have decided that his real enemies are not Democrats.  The anti-government Republicans, who have been his strongest supporters have also made it difficult for him to govern.  He might be more effective with a coalition of moderate Republicans and moderate Democrats.  This will be a test of that theory. 

How Russian Trolls Purchased Ads On Facebook Illegally During Election

It is illegal for foreign organizations or individuals to purchase ads to influence political campaigns.  Social media, like Facebook, derive their revenue from advertisers.  Advertising on social media has advantages over other media such as television.  The social media enables advertisers to identify likely targets for their ads which makes them more cost effective than ads that are not targeted to an identified audience.  It is also easier to disguise the identity of those who purchase ads on Facebook and other social media outlets.

Facebook determined that a Russian troll farm, located in St. Petersburg, called the Internet Research Agency, had spent $100,000 on Facebook ads during the 2015 and 2016 election cycle.  The agency is financially supported by a wealthy individual with a personal relationship to Putin and Russian intelligence agencies.  They followed the pattern that advertisers typically employ.  During the 2015 campaign they tracked Facebook users who responded to divisive cultural issues such as race, immigration, gun control etc.  They then targeted those users with divisive ads during the 2016 election cycle.  They also focused their ads on geographic areas much like political campaigns do during an election.  Facebook did not comment on which candidate was helped by the ads.  However, it is pretty clear that Trump's campaign made extensive use of divisive cultural messages.

Facebook did not reveal any connections between the Russian troll farm and the Trump campaign,  However,  Trump's campaign obviously had lots of information that might have been useful to the Russian troll farm. Trump's digital media operation was managed by his son-in-law Jared Kushner.  His operation also hired a consulting firm which uses sophisticated analytic tools to inform digital marketing efforts.

Wednesday, September 6, 2017

Hurrican Harvey May Force Trump To Swallow A Bitter Pill

Trump would like to sign a bill that provides funds for the Texas disaster.  That would enable him to be viewed as hero without needing to do anything.  The leaders in the House and the Senate plan to attach things to the Harvey relief package that Trump and conservatives will not like.  It will not provide funds for Trump's promised wall and it will provide funds to keep the government running by raising the debt ceiling.  Hopefully this is a sign the Republican Congress will not be dominated by Trump and his conservative base.  They will get votes from Democrats that compensate for the loss of Tea Party votes.

How The Smartphone And The Printing Press Changed The World

The printing press made monks obsolete.  They no longer had a monopoly on the scriptures.  The bible was published in popular languages and could be read and interpreted by the faithful.  That led to the reformation and years of warfare within the Christian community.  It also enabled scientists, philosophers and others to share their ideas with each other.  The exchange of information and ideas led to the industrial revolution and the formation of democratic governments.  Monarchies were overthrown along with the monks who lost their monopoly.  The US revolution was based upon ideas and principles that were easily shared through the print media.  The French Revolution was also inspired by the spread of ideas by way of the print media. 

This article argues that the smartphone is changing the world much like the advent of the printing press.  It argues that Mitch McConnell, who is the Republican leader of the Senate,  is much like the monks who lost their monopoly over the scriptures.  He possessed the levers of power that are granted to his position by the Republican Party. He could use his powers to allocate resources to senators and political candidates that met with his favor.  Donald Trump is not a Republican.  He won a primary campaign against tradition Republicans who were supported by the Republican Party and its apparatus.  He used the smartphone and the social media to reach his audience without help from the Republican Party.  He was also assisted in the general election by his campaign, and other supporters who effectively used the social media to win the election.  Bernie Sanders also used the social media to wage a battle with Hillary Clinton for the Democratic nomination.  He did much better in the primary campaign than might have been expected by his effective use of the social media.  It would appear that the smartphone, and the social media, may have seriously weakened the monopoly that political parties had before the revolution in the distribution of information.  We may only be in the beginning of this revolution.  It will affect other institutions beyond our political parties.  We are in a new era and we don't know where it will lead us.

The Conservative Coalition That Pushed Trump To Leave Paris Accord

Donald Trump campaigned against the Paris Accord and after being elected his intent is to abolish the Environmental Protection Agency (EPA).  A coalition of "free market activists" led by Myron Ebell who is the CEO of the Competitive Enterprise Institute, wrote a letter to Trump which reminded him to keep his promise about leaving the Paris Accord.  Trump put Ebell in charge of the EPA transition team.  His first step in the plan to eliminate  the EPA was to make substantial cuts in the number of EPA professionals.  Trump placed the Attorney General from Oklahoma, who had sued the EPA numerous times, as the head of the EPA.  He has been carrying out the plan to weaken and eliminate the EPA since assuming his position.

This article describes the coalition of conservative "charities" that receive tax deductible  contributions from energy firms and wealthy individuals.  They promote themselves as educational organizations. It is a group of non-scientists that challenge the findings of the scientific community. They believe that government regulations are the enemy of the free market economy, and they believe that the threat of global warming provides governments with an excuse to regulate economic activity.  They also claim that government regulation of economic activity is responsible for slower economic growth rates and the loss of jobs.  Trump jumped on this bandwagon as part of his promise to stimulate the economy and promote job growth.  Trump, of course, has no interest in the science, or in the longer term consequences of his policies.  The speech that he gave when he announced our departure from the Paris Accord was simply a victory speech to his base which proves that he is winning the battle to drain the swamp. Myron Ebell was an invited guest in Rose Garden where Trump made his victory speech.

Sunday, September 3, 2017

Adam Smith On The Value Of Public Education

Way back in 1776 Adam Smith argued that public education provided a valuable asset to the state.  It not only provided workers with knowledge and skills, which were essential for the economy, it was essential for good citizenship.  Educated citizens would be able to properly evaluate the performance of government and they would less influenced by superstitions and misinformation.  This must seem like an obvious point today.  However,  conservatives, particularly in the Southern states, opposed public education for many years.  Even today, the funding of public education, and the preparation of teachers, differs substantially between our states.  Moreover, the level of education that is required to participate fully in a modern state like the US goes well beyond acquiring basic skills.  Smith reserved higher education for those in higher ranks in 1776.  He did not anticipate the modern economy and the development of a democratic society.  The GI Bill Of Rights which enabled returning soldiers to attend college, and the state university system, contributed enormously to the development of the US economy and to responsible participation in a democratic society.  Public funding for higher education today has been reduced while the costs have increased dramatically.  Student debt in the US is a drag on the economy and family formation.  We have also seen how the less educated segment of our nation is vulnerable to the influence of demagogues and forms of propaganda that are facilitated by the social media.  Our system of government and our modern economy is more education dependent than it has ever been to our future.

Saturday, September 2, 2017

The Relationship Between Corporate Profits And Investment Is Zero

The details of the tax plan that is being debated by Republicans have not been determined.  However, it is clear that the final plan will call for a cut in the corporate tax rate.  The rationale for cutting the corporate tax rate is that it will increase corporate profits.  It is assumed that corporations will invest the additional profits.  That would be a good idea if there were a positive relationship between corporate profits and the level of investment.  The graph below shows that there is no positive relationship between corporate profits and corporate investments.  The profits can also be used for stock buybacks and to increase dividends payouts.  Stock buybacks increase the stock price by reducing the number of shares outstanding.  CEO's tend to manage the stock price for two reasons. Their performance and their bonuses are strongly influenced by increases in the stock price.  Moreover,  their compensation plans typically pay out less in salary than they do in stock options.  Since they are large holders of stock they also benefit from dividend payouts which are taxed at a much lower rate than their salaries.  A higher stock price also lowers the cost of acquiring another firm which typically involves swapping your stock for the acquired firms stock.  Acquisitions also tend to increase the stock price since the combined firm will have larger revenues and profits as soon as the acquisition is completed.  The return on capital investments is less certain and the profits may not be realized for several years.  The average tenure of a CEO is around seven years.  Capital investments could be more reliably increased by changing the form of CEO compensation than by cutting the corporate tax rate.

The blue line in the graph shows corporate after tax profits as a percent of GDP.  The red line is corporate fixed investment as a percent of GDP.  The relationship between profits and investment is pretty random.  After tax profits were low in 1980s because taxes were high, but investment was higher during this period than they were after the tax rates were lowered.

This does not mean that we should not reform corporate taxes.  The current system creates an incentive for corporations to engage in tax avoidance strategies by shifting their profits to tax havens. It also encourages corporations to borrow money to pay out dividends because interest payments are tax deductible.  That rewards current stockholders while lowering the effective tax rate.

Friday, September 1, 2017

Paul Manafort May Be The Weak Link In The Russian Investigation

Paul Manafort was Trump's campaign manager and he was also present at a meeting set up by Donald Trump Jr. to meet with a lawyer who promised to provide the Trump campaign with damaging information about Hillary Clinton.  Most people don't really know much about Manafort and what the Special Counsel has been uncovering in his investigation of Manafort.  This article tells you all you need to know about Manafort and how he might be used in the Russian investigation.

Getting Ready For Cyberwar In Coming Elections

This article describes some of the methods that were used on the social media to influence the presidential election.  Russian hackers successfully employed bots on Twitter and elsewhere in an effort to influence the presidential election.  They are not going away.  Their primary goal is to disrupt the operation of the US government domestically and globally.  They helped Donald Trump's campaign and Trump has given them more than they could have expected.  He has been a wrecking ball that has badly damaged our system of governance and our relationships with international allies. The are clicking their heels in Russia and Ukraine while they explore new ways to use the social media.  This article describes some of the programs underway to limit the effectiveness of the bot attacks but they will find new ways to respond to our defense system.  The social media will remain vulnerable to cyberwarfare in their current form.  The bots are still at work and they will be out in force in 2018.  They have demonstrated their effectiveness and that will get them as much support as they need to develop their capability.

The Arizona Senate Primary Will Determine The Soul Of The GOP

Some people believe that Trump is a singularity who will disappear while the Republican Party returns to its ideological orthodoxies.  The looming Republican primary that Senator Jeff Flake will face next year may provide the answer.  Jeff Flake is a Bary Goldwater type conservative who wrote a book which argues for a return to Goldwater's ideological roots.  That would usually be a winning strategy in Arizona.  However, the book was critical of Donald Trump and Flake has not been supportive of Trump's policies or his behavior in office.  Predictably, Trump has not been happy with a Republican senator who does not genuflect to his majesty.  Trump has publically criticized Flake and one of his billionaire friends has given $300,000 to a potential opponent's campaign.  November is a long way off and lots of things can happen during that time.  However, if a Bary Goldwater type conservative cannot win a primary in Arizona, while facing criticism from Trump, it may single the end of GOP orthodoxy.  The Republican Party will have been transformed to the Trump Party.