Bob Corker is an important Senator from Tennessee who chairs an important senate foreign policy committee. He believes that Trump is ignorant about governing and that he is dangerous because he could trigger a world war. Trump, of course, has resorted to lying about Corker on Twitter. Corker dismisses Trump's lies, which are typical Trump responses to criticism. He also tells us that most of his Republican colleagues in the senate share his concerns about Trump. They may fear Trump's power over his political base, but they have no respect for him as a person or as our president.
Corker has decided not to run for reelection in 2018 but his position as the chair of the foreign policy committee can block many of Trump's foreign policy proposals. Trump cannot afford to lose more than two Republican votes in the senate to pass legislation. Corker is only one of many senators who could vote against Trump on important bills and appointments. Trump seems to believe that he can operate without cooperation from the Republican senate by blaming Congress for his failed legislation and by threatening them by inciting his base against those who oppose him.
Monday, October 9, 2017
Google Used Twitter Data To Uncover Russian Linked Ads During Election
Google is the latest social media firm to discover Russian ads on its platforms during the election. Some of the ads were linked to the troll farm that produced many of the Facebook ads used during the campaign. However, other Russian sources were discovered on Google platforms. The ads were designed to exploit divisive issues such as racism and anti-immigrant sentiment. However, they were also designed to discourage Bernie Sanders supporters from voting for Clinton. They also supported Jill Stein's third party candidacy. A vote for Stein was a vote lost by Clinton. There were enough votes for third party candidates in the rust belt states to enable Trump to win a majority of electoral college votes while losing the popular vote.
Congressional committees investigating Russian intervention in the presidential election are demanding more information from the social media giants. They have determined that Russian involvement in the election was substantial and significant. Trump, of course denies this, but he denies everything that raises questions about himself. Unfortunately, many who voted for Trump are unwilling to accept the evidence uncovered by congressional investigators and by US intelligence agencies. It will also be difficult for the social media firms to prevent the same thing from happening in future elections. Their platforms are vulnerable to attacks by sophisticated groups. Their business models are based upon ad revenues which encourages open access to their platforms by anyone, including malicious attackers.
Congressional committees investigating Russian intervention in the presidential election are demanding more information from the social media giants. They have determined that Russian involvement in the election was substantial and significant. Trump, of course denies this, but he denies everything that raises questions about himself. Unfortunately, many who voted for Trump are unwilling to accept the evidence uncovered by congressional investigators and by US intelligence agencies. It will also be difficult for the social media firms to prevent the same thing from happening in future elections. Their platforms are vulnerable to attacks by sophisticated groups. Their business models are based upon ad revenues which encourages open access to their platforms by anyone, including malicious attackers.
An Atrocious Tax Plan From A Dishonest Administration
Larry Summers is a Democrat. He typically disagrees with Republican economists about tax policy. That is expected because Democrats and Republicans do not share the same value system. Even though he often disagrees with respectable Republican economists he understands why they disagree on tax policy and he does not question their honesty. Summers has no respect for Trump's plan. He explains why the Trump administration's tax plan is a terrible plan that is based upon dishonest assumptions by his Treasury Secretary and his top economic advisors. He describes the likely economic consequences of the plan, which will be bad for our economy, and bad for the majority of Americans. He concludes by arguing that the US will lose its position of economic leadership during the coming meeting of central bankers and international economists. They don't try to sell terrible economic plans to a poorly informed electorate by telling obvious lies. The fallacies in the Trump plan and the lies being told to sell the plan will be obvious to everyone at the meeting.
The Economic Policy Institute is a liberal leaning organization that does not share the value system of the Republican Party. However, it has carefully considered the assumptions that Republicans use to justify their tax policies. Most of the assumptions do not stand up well to a careful examination. In particular, the assumption that corporate tax cuts are required to stimulate corporate investment and job creation fall apart upon analysis.
The Economic Policy Institute is a liberal leaning organization that does not share the value system of the Republican Party. However, it has carefully considered the assumptions that Republicans use to justify their tax policies. Most of the assumptions do not stand up well to a careful examination. In particular, the assumption that corporate tax cuts are required to stimulate corporate investment and job creation fall apart upon analysis.
Thursday, October 5, 2017
Why The Majority Keeps Losing On Gun Controls
The shoot out in Las Vegas has focused our attention on gun control again. However, we expect again, that Congress will do little to control the use of guns in the US. The NRA is an impediment because it funnels millions to members of Congress. We all expect and understand the power exerted by the NRA. This article tells a different story. It explains why the majority of Americans do not get what they want. The explanation is simple. We have a non-majoritarian democracy in the US.
The over-representation of rural states in the Senate is part of this problem. Each state is represented by two senators without regard to population. For example, if 50 senators from our 25 smallest states vote for a bill along with the Vice President, Senators representing 16% of the population will overrule the 84% majority. After the shooting of school children in Sandy Hook senators representing 63% of the population were overruled by senators representing only 37% of Americans.
The Senate used the filibuster on numerous occasions to defeat Democratic proposals in the Obama administration. That was possible even with a Democratic majority in the Senate because several Democratic members of the Senate, from conservative rural states, voted with Republicans to enable filibusters.
The problem of over representation will worsen over time. By 2040 70% of the population will live in 15 large states. They will be represented by only 30% of the Senate membership.
Donald Trump lost the popular vote in the 2016 election by the largest percentage of any president who won a majority in the electoral college. His huge majorities in very conservative rural areas overcame the smaller majorities who voted for Clinton in metropolitan areas where 84% of our population chooses to live. Our electoral college system over represents rural voters. Trump's campaign took advantage of this disparity by pitting himself against the "cosmopolitan elite" who live in metropolitan areas who do not share the values of rural Americans or their economic interests.
The House of Representatives is also over represented by conservatives by the use of
gerrymandering. Districts have been redrawn in states controlled by Republican legislatures so that the democratic vote in metropolitan areas is overcome by redrawing districts so that the democratic vote is confined to a smaller number of districts.
There is not much that can be done about the over representation of small states in the Senate without altering the Constitution. It may be possible to do something about gerrymandering, but don't hold your breath. The Supreme Court is now hearing a case about gerrymandering in Wisconsin. There are more conservative votes in the Supreme Court today because the Senate majority refused to consider President Obama's nominee prior to the election. Trump appointed a conservative to that seat.
One of the consequences of our non-majoritarian democracy is that our government increasingly reflects the values of rural Americans who receive most of their information from talk radio, Fox News and the social media. That is a big change from days in which the three major TV networks reported the news for most Americans. It is much easier today for fringe groups to communicate with each other and we have a president who communicates directly to his base via Twitter. He also attacks our major media outlets as sources of "fake news" that he tells his base to ignore. Foreign governments have also demonstrated their ability to exacerbate the divisions that exist in our nation by exploiting the business models of the social firms. They get almost all of their revenue from advertising and their systems have been set up primarily to increase advertising revenue. Unlike the major media, in which the sponsors of ads are made public, the sponsors of ads in social media are often invisible to the recipients of the ads. The system has also been set up to encourage messages and images to go viral to users that are easily targeted by invisible sources of fake news and false conspiracies. Rural Americans, and less educated Americans, are more susceptible to conspiracy theories and fake news. They are at the center of Trump's minority base which does not represent the values and ideas held by the majority of our citizens. They have been lied to by Republicans in order to win their votes. That makes it difficult for Trump and the Republican Congress to pass legislation. They have to continue feeding lies to their base. Republicans must pretend to build a war; they have to lie about global warming; they have to lie about tax reform; they have to lie about Russian intervention in the election etc. etc. etc.
The over-representation of rural states in the Senate is part of this problem. Each state is represented by two senators without regard to population. For example, if 50 senators from our 25 smallest states vote for a bill along with the Vice President, Senators representing 16% of the population will overrule the 84% majority. After the shooting of school children in Sandy Hook senators representing 63% of the population were overruled by senators representing only 37% of Americans.
The Senate used the filibuster on numerous occasions to defeat Democratic proposals in the Obama administration. That was possible even with a Democratic majority in the Senate because several Democratic members of the Senate, from conservative rural states, voted with Republicans to enable filibusters.
The problem of over representation will worsen over time. By 2040 70% of the population will live in 15 large states. They will be represented by only 30% of the Senate membership.
Donald Trump lost the popular vote in the 2016 election by the largest percentage of any president who won a majority in the electoral college. His huge majorities in very conservative rural areas overcame the smaller majorities who voted for Clinton in metropolitan areas where 84% of our population chooses to live. Our electoral college system over represents rural voters. Trump's campaign took advantage of this disparity by pitting himself against the "cosmopolitan elite" who live in metropolitan areas who do not share the values of rural Americans or their economic interests.
The House of Representatives is also over represented by conservatives by the use of
gerrymandering. Districts have been redrawn in states controlled by Republican legislatures so that the democratic vote in metropolitan areas is overcome by redrawing districts so that the democratic vote is confined to a smaller number of districts.
There is not much that can be done about the over representation of small states in the Senate without altering the Constitution. It may be possible to do something about gerrymandering, but don't hold your breath. The Supreme Court is now hearing a case about gerrymandering in Wisconsin. There are more conservative votes in the Supreme Court today because the Senate majority refused to consider President Obama's nominee prior to the election. Trump appointed a conservative to that seat.
One of the consequences of our non-majoritarian democracy is that our government increasingly reflects the values of rural Americans who receive most of their information from talk radio, Fox News and the social media. That is a big change from days in which the three major TV networks reported the news for most Americans. It is much easier today for fringe groups to communicate with each other and we have a president who communicates directly to his base via Twitter. He also attacks our major media outlets as sources of "fake news" that he tells his base to ignore. Foreign governments have also demonstrated their ability to exacerbate the divisions that exist in our nation by exploiting the business models of the social firms. They get almost all of their revenue from advertising and their systems have been set up primarily to increase advertising revenue. Unlike the major media, in which the sponsors of ads are made public, the sponsors of ads in social media are often invisible to the recipients of the ads. The system has also been set up to encourage messages and images to go viral to users that are easily targeted by invisible sources of fake news and false conspiracies. Rural Americans, and less educated Americans, are more susceptible to conspiracy theories and fake news. They are at the center of Trump's minority base which does not represent the values and ideas held by the majority of our citizens. They have been lied to by Republicans in order to win their votes. That makes it difficult for Trump and the Republican Congress to pass legislation. They have to continue feeding lies to their base. Republicans must pretend to build a war; they have to lie about global warming; they have to lie about tax reform; they have to lie about Russian intervention in the election etc. etc. etc.
A Guide To A Narciissist"s Respose To The Misfortunes Of Others
One of my friends asked me for an explanation of narcissism. The disasters that we had in the last month are a real threat to a narcissist because they encourage those subjected to disaster to focus on themselves instead of the narcissist. Donald Trump was faced with that problem during his photo op trip to Puerto Rico. He had to figure out a way to turn the attention to where it really belonged. That is, to The Donald. Dana Milbank observed how The Donald shifted all of the attention to himself. Milbank adapted The Donald's behavior to a book which described how narcissists respond to situations where people are focused more on themselves than they are on The Donald. Watching a narcissist at work during such a threat tells us all that we need to know about narcissism. He even brought his trophy wife with him on the trip. She had no real purpose during the trip. The Donald uses her to bolster his own image. Only a very important person like himself can attract and own a trophy wife who shows off the latest fashions even in disaster areas.
Wednesday, October 4, 2017
What Is The Relationship Between Tax Cuts And GDP Growth?
The US economy is near full employment but the Trump administration has proposed large cuts in taxes to expand the economy. That raises a general economic question about the use of tax policy to stimulate economic growth. This article examines the ways in which tax cuts might stimulate economic growth by examining the relationship between taxes and the inputs to the economy. Republican tax cut proposals are typically based on the assumption that lower taxes will increase the supply of inputs to the economy.
One of the inputs to GDP is the supply of labor. Supply side economists argue that reducing individual income taxes will increase the supply of labor. That's a difficult argument to make in full employment economy, but it might be a good way to stimulate growth if there is a strong relationship between the supply of labor and the after tax price paid to labor. Most of the research on this top shows that the price elasticity of labor supply is close to zero. That is, increasing net wages by cutting the individual tax rate will not increase the supply of labor.
Capital is another input to GDP. Its hard to measure the supply of capital but dividends to shareholders are a payment to the owners of capital. The relationship between dividend payouts and growth in the supply of capital is close to zero. Business investment in new capital has not grown in response to cuts in the tax on dividends. Business executives tend to invest in new capital in response to the demand for their products and services. The fact that interest rates are very low also suggests that the economy is fully capitalized. Interest rates would rise if businesses were borrowing funds to increase their supply of new capital.
Investments in R&D might increase innovation and productivity. That would increase the rate of economic growth. The tax plan proposed by the Trump administration is focused on cutting the corporate income tax. The elasticity of demand for R&D and the corporate tax rate is close to zero. However, the proposal to allow corporations to write off capital investments faster might have some effect on capital investment.
Financial transactions such as buying and selling stocks and other assets do not increase output. However, services are provided for those transactions. The prices paid for commissions etc. do contribute to GDP. Reducing the tax on capital gains from financial transactions might increase the number of transactions but this would not have a big effect on GDP. Some have even argued that a transaction tax that was used to fund government spending would stimulate growth.
In summary, tax cuts in a full employment economy will not increase the rate of economic growth. Supply side approaches are not the best way to grow the US economy.
One of the inputs to GDP is the supply of labor. Supply side economists argue that reducing individual income taxes will increase the supply of labor. That's a difficult argument to make in full employment economy, but it might be a good way to stimulate growth if there is a strong relationship between the supply of labor and the after tax price paid to labor. Most of the research on this top shows that the price elasticity of labor supply is close to zero. That is, increasing net wages by cutting the individual tax rate will not increase the supply of labor.
Capital is another input to GDP. Its hard to measure the supply of capital but dividends to shareholders are a payment to the owners of capital. The relationship between dividend payouts and growth in the supply of capital is close to zero. Business investment in new capital has not grown in response to cuts in the tax on dividends. Business executives tend to invest in new capital in response to the demand for their products and services. The fact that interest rates are very low also suggests that the economy is fully capitalized. Interest rates would rise if businesses were borrowing funds to increase their supply of new capital.
Investments in R&D might increase innovation and productivity. That would increase the rate of economic growth. The tax plan proposed by the Trump administration is focused on cutting the corporate income tax. The elasticity of demand for R&D and the corporate tax rate is close to zero. However, the proposal to allow corporations to write off capital investments faster might have some effect on capital investment.
Financial transactions such as buying and selling stocks and other assets do not increase output. However, services are provided for those transactions. The prices paid for commissions etc. do contribute to GDP. Reducing the tax on capital gains from financial transactions might increase the number of transactions but this would not have a big effect on GDP. Some have even argued that a transaction tax that was used to fund government spending would stimulate growth.
In summary, tax cuts in a full employment economy will not increase the rate of economic growth. Supply side approaches are not the best way to grow the US economy.
Tuesday, October 3, 2017
Trump Is Not The Only Liar In His Administration Selling Its Tax Plan By Lying
Steve Mnuchin is Trump's Treasury Secretary. He is a billionaire who wanted the government to fund part of his honeymoon to Europe by calling it a business trip. He has also been one of the major architects of the tax framework that Republicans are trying to sell to the public. One of his problems is that the nonpartisan Tax Policy Center published a report which concluded that 80% of the tax cuts went to the top 1%. It also reported that the tax cuts would raise federal budget deficits by $2.4 trillion over ten years. He and others in the Trump administration have been promoting the tax cuts as boon to the middle class. That required Mnuchin to do two very bad things that should never be done by a Treasury Secretary.
Mnuchin disputed the analysis done by the Tax Policy Center on Fox News by claiming that the tax plan is incomplete and that any analysis would be wrong. He then argued that the incomplete tax plan would reduce federal deficits by $1 trillion over ten years. He also claimed that the plan was for the middle class because the corporate tax cuts in the plan went primarily to the middle class. On Fox News he said that 70% of the benefits went to the middle class. In a speech in Kentucky he claimed that 80% of the benefits went to the middle class.
In the first place, his defense against the analysis done by the Tax Policy Center means that the tax framework that the administration released must be worthless. He argued that details in the plan, apparently which only he knows, turn $2.4 trillion of federal deficits into a $1 trillion reduction in federal deficits. The details in the tax plan have a Midas touch. They produce a $3.4 difference between the Tax Policy analysis and his estimate of budget deficits.
Mnuchin's claim that almost all of the gains from the corporate tax would go the middle class also requires a big lie. For many years it was assumed that 100% of corporate tax cuts went to shareholders. Economists in the Treasury did a study that showed that only 80% of corporate tax cuts went to shareholders. The remainder of the tax cuts went to workers. Since that report conflicts with Mnuchin's claim that 70-80 percent of corporate tax cuts went to shareholders, something had to be done. So Mnuchin did what any respectable Treasury Secretary would not do. He buried the internal report done by his own department. It is no longer available.
Its pretty clear that Mnuchin is willing to do whatever he can to sell the Trump tax plan as a middle class plan. In order to do that he had to dispute an analysis done by the nonpartisan Tax Policy Center which showed that 80% of the tax cuts went to the top 1% with a claim that the framework the administration is selling is not useful. He also had to bury an internal study which showed that corporate tax cuts went primarily to shareholders and not to the middle class as he claims.
The Trump tax plan would also eliminate the estate tax. It defends ending the estate tax by arguing that it must be done to protect small businesses and small farmers from an unfair tax. The graph below shows that the estate tax is not being cut to protect small businesses and farmers.
Mnuchin disputed the analysis done by the Tax Policy Center on Fox News by claiming that the tax plan is incomplete and that any analysis would be wrong. He then argued that the incomplete tax plan would reduce federal deficits by $1 trillion over ten years. He also claimed that the plan was for the middle class because the corporate tax cuts in the plan went primarily to the middle class. On Fox News he said that 70% of the benefits went to the middle class. In a speech in Kentucky he claimed that 80% of the benefits went to the middle class.
In the first place, his defense against the analysis done by the Tax Policy Center means that the tax framework that the administration released must be worthless. He argued that details in the plan, apparently which only he knows, turn $2.4 trillion of federal deficits into a $1 trillion reduction in federal deficits. The details in the tax plan have a Midas touch. They produce a $3.4 difference between the Tax Policy analysis and his estimate of budget deficits.
Mnuchin's claim that almost all of the gains from the corporate tax would go the middle class also requires a big lie. For many years it was assumed that 100% of corporate tax cuts went to shareholders. Economists in the Treasury did a study that showed that only 80% of corporate tax cuts went to shareholders. The remainder of the tax cuts went to workers. Since that report conflicts with Mnuchin's claim that 70-80 percent of corporate tax cuts went to shareholders, something had to be done. So Mnuchin did what any respectable Treasury Secretary would not do. He buried the internal report done by his own department. It is no longer available.
Its pretty clear that Mnuchin is willing to do whatever he can to sell the Trump tax plan as a middle class plan. In order to do that he had to dispute an analysis done by the nonpartisan Tax Policy Center which showed that 80% of the tax cuts went to the top 1% with a claim that the framework the administration is selling is not useful. He also had to bury an internal study which showed that corporate tax cuts went primarily to shareholders and not to the middle class as he claims.
The Trump tax plan would also eliminate the estate tax. It defends ending the estate tax by arguing that it must be done to protect small businesses and small farmers from an unfair tax. The graph below shows that the estate tax is not being cut to protect small businesses and farmers.
Subscribe to:
Posts (Atom)