This makes sense. Governments need money.
What would make even more sense is for lots of government officials to realize that if taxing alcohol can mean a boost in revenues, then legalizing and taxing not harmful yet still illegal drugs like marijuana could mean a massive boost in revenues.
Taxes are the obvious, but the reduction in spending on law enforcement and incarceration would make it a double boost. Just like prohibition increased crime and was a huge drain on society so too is the war on drugs, but we would rather moralize than be responsible.
Friday, September 30, 2011
Thursday, September 29, 2011
Social Meh.
I'm really not a social gaming fan. I've tried a few (not on Facebook, which I really don't much care for either) but they all struck me as crappy, and remarkably similar. The the linked article is an excellent read as to why (it's long).
Short version: the games are designed to be addictive so that they can extract money from people. They are not designed to be fun, good, or entertaining.
Short version: the games are designed to be addictive so that they can extract money from people. They are not designed to be fun, good, or entertaining.
Monday, September 26, 2011
Now on Ezra
Another case of Ezra not asking the meaningful questions in this interview with Robert Frank. This is just to reiterate my complaints about Frank regarding the "progressive" consumption tax from a few days ago.
First, in an economy suffering from too little demand, a progressive consumption tax will reduce demand further...particularly on those most able to adjust their consumption/savings amounts. This will make the economy worse. We have lots of cash tied up, this would do the opposite of what is necessary, encouraging people to keep money out of the economy.
Second, a progressive consumption tax isn't progressive, because (really) rich people have more disposable income and save/invest much larger fractions of their income.
While Franks arguments in some cases have merit, they should be looked at differently. The tax code encourages much of the bad behavior he attributes to over-consumption. Elimination of all deductions would go a long way to getting people to buy smaller, less expensive houses. Higher gas tax would encourage smaller more fuel efficient vehicles. If people actually paid what things really cost rather than the risk deferred & socialized costs we now pay (thanks in large part to the tax code) consumption would correct in a way it seems he would consider beneficial.
A pure consumption tax, however, just penalizes all consumption, no matter its benefits, and comes down hardest on those who have the least disposable income, not those with the most.
First, in an economy suffering from too little demand, a progressive consumption tax will reduce demand further...particularly on those most able to adjust their consumption/savings amounts. This will make the economy worse. We have lots of cash tied up, this would do the opposite of what is necessary, encouraging people to keep money out of the economy.
Second, a progressive consumption tax isn't progressive, because (really) rich people have more disposable income and save/invest much larger fractions of their income.
While Franks arguments in some cases have merit, they should be looked at differently. The tax code encourages much of the bad behavior he attributes to over-consumption. Elimination of all deductions would go a long way to getting people to buy smaller, less expensive houses. Higher gas tax would encourage smaller more fuel efficient vehicles. If people actually paid what things really cost rather than the risk deferred & socialized costs we now pay (thanks in large part to the tax code) consumption would correct in a way it seems he would consider beneficial.
A pure consumption tax, however, just penalizes all consumption, no matter its benefits, and comes down hardest on those who have the least disposable income, not those with the most.
Thursday, September 22, 2011
Empire Does Dominate
George Lucas had a wonderful vision with Star Wars. Unfortunately he is a middling director and a pretty poor writer to boot. Empire Strikes Back was neither written nor directed by Lucas, and the people who did the honors were much better than him. The result was (by far) the best movie of the lot.
With each new prequil announcement, my biggest disappointment was finding out that Lucas would be directing/writing again. Though afterward, it was even worse to find out that he had some understanding of his writing shortcoming and had someone else pen dialog for the romantic scenes between Anikin and Padme in Clones...dialog that was some of the most painful stuff I have ever listened to.
With each new prequil announcement, my biggest disappointment was finding out that Lucas would be directing/writing again. Though afterward, it was even worse to find out that he had some understanding of his writing shortcoming and had someone else pen dialog for the romantic scenes between Anikin and Padme in Clones...dialog that was some of the most painful stuff I have ever listened to.
Wednesday, September 21, 2011
Consumption and Investment Are Both Roles for Money in the Economy
Ok, I'll second the individual vs. group thing being discussed in this article on Darwin vs. Smith vs. the Market. I'll really agree in it's application to housing, particularly in good school districts. But it doesn't apply to every aspect of consumption and so a "progressive consumption tax" isn't the magical fix that is claimed.
Where consumption is related to understood/believed future benefits and where there is a bidding up effect, then it is true. This is true of housing and education (both school districts and college tuition). To a lesser extent it may be true of some subset of things like clothing and food, though the extent to which other, beneficial market effects can react has meant that it really isn't true.
On the other hand there is a whole mess of consumption that doesn't really mean much or provide any meaningful advantage but does contribute positively to the economy. Buying an Xbox to sit next to a PS3 is an example. So is going on vacation, and tipping your server, and replacing your functional 7 year old car with a new one...and so is buying a yacht. But a rich person buying a yacht is, despite any ostentatious display we may find objectionable, giving business to a company that employs lots of people that are not rich.
In fact whenever we purchase things we are supporting employed workers. Often in many different places, from the store where we bought it (even an online one) to the company/companies responsible for transporting it around, to the company that produced it...even if the actual manufacture was in China, lots of employed people in this country were necessary to get that purchased item to the buyer.
Right now our economy is in a funk expressly because people are not making those purchases. A progressive consumption tax will make this worse. Moreover, we have lots of money sitting idle that would love to be invested, but can't because there are not enough opportunities because CONSUMPTION IS TOO LOW. A tax plan that lowers consumption and raises savings will make things worse, not better. A tax plan that eliminates goofy tax benefits for homeowners and student loan (sharks) would be a much better start. You know what that would look like? A progressive income tax with no deductions, and with the same rates applied to capital gains.
Perpetuation of wealth is not a good thing. It makes for idle resources, which means lower employment. There are two ways to have money work in the economy: investment and consumption. The tax system in the US benefits investment heavily but only benefits a subset of problematic consumption (mainly real estate and education). If the tax code evened out by directly benefiting neither, things would be better.
A last point here is that no matter how steeply progressive a consumption tax is it will be regressive in the end. If someone making $54k/year has to pay taxes on $12k of that ($30k deduction, plus $12k of savings) then that person is likely to pay a larger fraction of their income than a multimillionaire bringing in $400k/year in capital gains but who "only" needs to spend $70k of that. Someone spending $500k/year out of their $10M income would be taxed less heavily than the $54k/year family (yes, the exact rates matter, but it would need to be extreme to offset). Multi-millionaires and billionaires just don't spend a huge fraction of their income.
Where consumption is related to understood/believed future benefits and where there is a bidding up effect, then it is true. This is true of housing and education (both school districts and college tuition). To a lesser extent it may be true of some subset of things like clothing and food, though the extent to which other, beneficial market effects can react has meant that it really isn't true.
On the other hand there is a whole mess of consumption that doesn't really mean much or provide any meaningful advantage but does contribute positively to the economy. Buying an Xbox to sit next to a PS3 is an example. So is going on vacation, and tipping your server, and replacing your functional 7 year old car with a new one...and so is buying a yacht. But a rich person buying a yacht is, despite any ostentatious display we may find objectionable, giving business to a company that employs lots of people that are not rich.
In fact whenever we purchase things we are supporting employed workers. Often in many different places, from the store where we bought it (even an online one) to the company/companies responsible for transporting it around, to the company that produced it...even if the actual manufacture was in China, lots of employed people in this country were necessary to get that purchased item to the buyer.
Right now our economy is in a funk expressly because people are not making those purchases. A progressive consumption tax will make this worse. Moreover, we have lots of money sitting idle that would love to be invested, but can't because there are not enough opportunities because CONSUMPTION IS TOO LOW. A tax plan that lowers consumption and raises savings will make things worse, not better. A tax plan that eliminates goofy tax benefits for homeowners and student loan (sharks) would be a much better start. You know what that would look like? A progressive income tax with no deductions, and with the same rates applied to capital gains.
Perpetuation of wealth is not a good thing. It makes for idle resources, which means lower employment. There are two ways to have money work in the economy: investment and consumption. The tax system in the US benefits investment heavily but only benefits a subset of problematic consumption (mainly real estate and education). If the tax code evened out by directly benefiting neither, things would be better.
A last point here is that no matter how steeply progressive a consumption tax is it will be regressive in the end. If someone making $54k/year has to pay taxes on $12k of that ($30k deduction, plus $12k of savings) then that person is likely to pay a larger fraction of their income than a multimillionaire bringing in $400k/year in capital gains but who "only" needs to spend $70k of that. Someone spending $500k/year out of their $10M income would be taxed less heavily than the $54k/year family (yes, the exact rates matter, but it would need to be extreme to offset). Multi-millionaires and billionaires just don't spend a huge fraction of their income.
Tuesday, September 20, 2011
Bonds: Maybe Upside Down, So What?
I don't really understand this article. First off, for a bond market to be "upside down" that means that the return on investment is less than expected/projected inflation. So yes, it might be upside down, but what matters is a combination of return and security. Frankly nothing looks terribly safe, and beyond that, very little is actually returning anything.
As such, so long as treasuries yield more than stuffing cash in mattresses they are likely to keep their demand high. If there are no "safe" investments that can beat inflation then just beating zero is good enough.
As such, so long as treasuries yield more than stuffing cash in mattresses they are likely to keep their demand high. If there are no "safe" investments that can beat inflation then just beating zero is good enough.
David Brooks: Not a Sap
He is a complete and total moron. He's the kind of person who looks at a fight between a bully and the smart kid and thinks the smart kid to hand over his lunch money, apologize and run away. What a fucking tool. How is it that such an utterly undeserving hack gets paid the big bucks to write for a major newspaper?
There is so much wrong in his latest column (which I am not linking) that I can't even begin to point it out. If Republicans were to smell shit and call it roses, he would be pissed if Obama came back with "Well, it's really more of a carnation," because that would be too confrontational.
There is so much wrong in his latest column (which I am not linking) that I can't even begin to point it out. If Republicans were to smell shit and call it roses, he would be pissed if Obama came back with "Well, it's really more of a carnation," because that would be too confrontational.
Monday, September 19, 2011
Perception of Time
This is an alright article, but I think it misses the conclusion that arises from the whole of the study. Their argument is that perception of return trips as shorter has to do with expectation of duration not familiarity with landmarks...they do say that trips we are familiar with (like commute to/from work) don't have the effect because time expectations are appropriate.
The problem comes when perceiving travel to/from less desirable locations, or in a case like a distance run with fatigue on the second half, where they found the situation to be reversed. It seems clear that expectations should be the same for both these instances and the "standard" one but the time perception is the opposite. This should imply to them that perceptions of time are related less to the journey and more to the destination, i.e. some anticipation of arriving. Positive anticipation would stretch out the journey and negative shrink it down. Neutral anticipation should only show an effect if combined with a positive or negative from the other leg.
Now, figuring out positive/negative/neutral anticipation is a harder thing, but it seems that it is less an expectation of time and more an anticipation of being at the destination that causes us to distort our perception of time.
The problem comes when perceiving travel to/from less desirable locations, or in a case like a distance run with fatigue on the second half, where they found the situation to be reversed. It seems clear that expectations should be the same for both these instances and the "standard" one but the time perception is the opposite. This should imply to them that perceptions of time are related less to the journey and more to the destination, i.e. some anticipation of arriving. Positive anticipation would stretch out the journey and negative shrink it down. Neutral anticipation should only show an effect if combined with a positive or negative from the other leg.
Now, figuring out positive/negative/neutral anticipation is a harder thing, but it seems that it is less an expectation of time and more an anticipation of being at the destination that causes us to distort our perception of time.
Friday, September 16, 2011
Rogue Trading
Done right it would involve some of these:
Done the way it happened for UBS it really demonstrates the importance of getting something like Glass-Steagall back on the books.
Done the way it happened for UBS it really demonstrates the importance of getting something like Glass-Steagall back on the books.
Thursday, September 15, 2011
QE3 Student Loan Buy
I have been sending mental waves the way of Ben Bernanke regarding a QE3 program that would actually boost consumer demand by buying consumer debt rather than US debt. My "buy student loans" program would be a real boon to the economy in a way that giving banksters more money couldn't possibly be.
I do keep running into the same couple problems, however. The first is people like me, who would say "Thanks" and then put most of the extra into savings. It wouldn't all go there so it would still be a greater benefit than would be giving the money to banks, but not huge. This is largely solved by the somewhat complex scheme I outlined in the first post on this a while back. But I don't know if that would be a real possibility. Mostly that just isn't how the Fed does things. They just create money and buy stuff with it. They could probably buy all of Sallie Mae's outstanding student loans, but I doubt they could do the other part of the program that would ensure people like me do put extra into the economy.
I don't think that this is a terribly large problem, however. Student loans and payments on them have a larger effect on people just out of school. These are also generally people who could really use the extra money to buy things, and so for the most part this would still be a good deal, and would certainly a much, much better for the economy than would buying the equivalent of long term US bonds (and probably better than buying 10 times the amount of US bonds).
The other issue is how to argue against the "moral hazard" argument. The problem is that some student loan debt is accrued very badly. This could be someone picking up $100k in debt to get a fine arts degree that will lead to a $32k/year job. It could be someone taking on debt for 2-7 years of school, but who gets no degree to show for it. I think that the general argument against this is that 1. these are a very small fraction of the total student loans outstanding and 2. penalizing people for decades based on decisions made when they were 18-22 and really couldn't get the best information doesn't really send the best message. Also, I think that (state college) education should be free, so a one time forgive-all is still a good thing.
The other side of the "moral hazard" argument is that colleges and loan companies will use this as an excuse to step up costs and rates, and probably to be even looser with admission/approval. This is the harder side to deal with. If this really establishes some precedent then it could make the education situation worse. I'm not very concerned about this for a couple reasons. The main one is that this situation is not exactly normal and the Fed, if they were to do this, wouldn't be quick to repeat. The other reason is that there are so many problems currently--between high costs, predatory loan making and political gridlock--that I don't really see things getting much worse anyway.
I do keep running into the same couple problems, however. The first is people like me, who would say "Thanks" and then put most of the extra into savings. It wouldn't all go there so it would still be a greater benefit than would be giving the money to banks, but not huge. This is largely solved by the somewhat complex scheme I outlined in the first post on this a while back. But I don't know if that would be a real possibility. Mostly that just isn't how the Fed does things. They just create money and buy stuff with it. They could probably buy all of Sallie Mae's outstanding student loans, but I doubt they could do the other part of the program that would ensure people like me do put extra into the economy.
I don't think that this is a terribly large problem, however. Student loans and payments on them have a larger effect on people just out of school. These are also generally people who could really use the extra money to buy things, and so for the most part this would still be a good deal, and would certainly a much, much better for the economy than would buying the equivalent of long term US bonds (and probably better than buying 10 times the amount of US bonds).
The other issue is how to argue against the "moral hazard" argument. The problem is that some student loan debt is accrued very badly. This could be someone picking up $100k in debt to get a fine arts degree that will lead to a $32k/year job. It could be someone taking on debt for 2-7 years of school, but who gets no degree to show for it. I think that the general argument against this is that 1. these are a very small fraction of the total student loans outstanding and 2. penalizing people for decades based on decisions made when they were 18-22 and really couldn't get the best information doesn't really send the best message. Also, I think that (state college) education should be free, so a one time forgive-all is still a good thing.
The other side of the "moral hazard" argument is that colleges and loan companies will use this as an excuse to step up costs and rates, and probably to be even looser with admission/approval. This is the harder side to deal with. If this really establishes some precedent then it could make the education situation worse. I'm not very concerned about this for a couple reasons. The main one is that this situation is not exactly normal and the Fed, if they were to do this, wouldn't be quick to repeat. The other reason is that there are so many problems currently--between high costs, predatory loan making and political gridlock--that I don't really see things getting much worse anyway.
Wednesday, September 07, 2011
No One is Rich
Alternative title: "How the 4th Dimension Screws With Our Heads"
I am nowhere near the magical $250k/year number that we seem to have arbitrarily decided is the cutoff for rich, but I'm also not very old, and doing fairly well. In fact, so long as nothing too terrible happens in the next 15 years or so (which is not outside the realm of possibility) I should be pretty much free of debt (including student loan and hopefully even house), and pretty well positioned such that if something terrible were to happen at that point I wouldn't need to worry much.
Even now, I wouldn't consider that rich, but to a huge swath of this country, it is, and to the world writ large it certainly is. Rich is something that, no matter how much we make/have, is more than that. We compare up, not down. We also compare dollars to dollars and not $/age to $/age and both those things matter. As for comparing up, it is our nature. The age thing is harder to picture...
$60k/year is a very good income, but it is a particularly good income for a young single person with no kids. However, most young single people earning $60k year are professionals with a lot of debt. If that income is being used to pay off $120k in non-house debt (student loans and credit cards) before any living expenses kick in then it suddenly doesn't seem to be much. Of course, that income is a starting point and the debt is getting smaller. The idea is that, while someone just out of grad/professional school, may not have much extra each month this year, in 10-20 years they will be living easy while someone who cut out early with 20% of the debt load will be earning less with less opportunity to get ahead.
I've commented before on how the marginal value of $1 gets less and less as income skyrockets, but a similar thing happens when looking vs. age. When studying economics/accounting this comes out as a present value issue, but even that is not quite the same. If, through hard work and lots of saving/investing I have $1M in 40 years, that will be nice, and if I retire on that then I can be pretty comfortable for the remaining 5-25 years of life. Of course, I'll be 75 then and less able to enjoy life, but it'll still be good. If I had that same $1M today then I would be much better off, and if I had gotten it 12 years ago life would be amazing!
This is above and beyond the present value issue. It is a life issue. Someone who has enough money that they do not need to work the rest of their life can spend the rest of their life doing whatever they want. Some of us are fortunate enough that we are doing things we love even today, but even still that money would have a huge impact on my life today that it can't have in 30-40 years.
I am nowhere near the magical $250k/year number that we seem to have arbitrarily decided is the cutoff for rich, but I'm also not very old, and doing fairly well. In fact, so long as nothing too terrible happens in the next 15 years or so (which is not outside the realm of possibility) I should be pretty much free of debt (including student loan and hopefully even house), and pretty well positioned such that if something terrible were to happen at that point I wouldn't need to worry much.
Even now, I wouldn't consider that rich, but to a huge swath of this country, it is, and to the world writ large it certainly is. Rich is something that, no matter how much we make/have, is more than that. We compare up, not down. We also compare dollars to dollars and not $/age to $/age and both those things matter. As for comparing up, it is our nature. The age thing is harder to picture...
$60k/year is a very good income, but it is a particularly good income for a young single person with no kids. However, most young single people earning $60k year are professionals with a lot of debt. If that income is being used to pay off $120k in non-house debt (student loans and credit cards) before any living expenses kick in then it suddenly doesn't seem to be much. Of course, that income is a starting point and the debt is getting smaller. The idea is that, while someone just out of grad/professional school, may not have much extra each month this year, in 10-20 years they will be living easy while someone who cut out early with 20% of the debt load will be earning less with less opportunity to get ahead.
I've commented before on how the marginal value of $1 gets less and less as income skyrockets, but a similar thing happens when looking vs. age. When studying economics/accounting this comes out as a present value issue, but even that is not quite the same. If, through hard work and lots of saving/investing I have $1M in 40 years, that will be nice, and if I retire on that then I can be pretty comfortable for the remaining 5-25 years of life. Of course, I'll be 75 then and less able to enjoy life, but it'll still be good. If I had that same $1M today then I would be much better off, and if I had gotten it 12 years ago life would be amazing!
This is above and beyond the present value issue. It is a life issue. Someone who has enough money that they do not need to work the rest of their life can spend the rest of their life doing whatever they want. Some of us are fortunate enough that we are doing things we love even today, but even still that money would have a huge impact on my life today that it can't have in 30-40 years.
Tuesday, September 06, 2011
Marginal Tax Rates
...and Magic! (I am not linking the article despite its good graph because the overall argument and tone is rather vile.)
Republicans and other pro-uber-wealthy people tend to harp on marginal tax rates as such a powerful incentive for work that nothing else can even begin to matter. They seem to "think" that wealthy people are particularly sensitive to even a small change and that their behavior will (in some bizzaro self-destructive pattern) cause them to want less money if taxes are higher.
There are, however, people for whom their marginal rate does exceed 100%. They are a subset of the working poor. There are other places where marginal rates for poor and middle class end up much higher than those for wealthy people, depending on their exact combination of benefits, welfare and income.
The biggest reasons are welfare and tax breaks that phase out, but which provide nearly equal if not greater benefit than earning the next dollar. Here, conservatives have a real point (though it is never the one they make) which is that for some people in the US there is a negative incentive to work and earn more. Combining this with the benefits of leisure, this group is not only those for whom their marginal rate is > 100%, but also some whose marginal rate is below but close to 100%.
This is something that really could be fixed, and in a way that is humane (as opposed to the GOP's fix which is ending welfare...and giving more money to rich people). This can be done iff earned income -taxes replaces welfare/tax break money faster than 1:1, and really, it should be in the 2:1 range. That is, if someone earns $1 extra, and pays $.25 in taxes then they only give up at most $.25 in benefits.
My preferred technique would be some target minimum "income" level, say $17,000. Anti-poverty programs would essentially guarantee that minimum for everyone. The bottom tax bracket would be 0% up to twice that amount, but welfare benefits would be reduced $.50 for every $1 earned, meaning an effective tax of 50%. Honestly I would rather see the bottom effective rate at something more like 25%, but there has to be a balance between minimum standard of living and not subsidizing people earning more than enough to get by.
The exact mechanism for this could be any of a number of things. I think that splitting it up into separate programs that phase out differently would be good. A housing allotment that started at $500/mo, a food allotment that started at $300/mo, and a discretionary allotment that made up the rest. As income goes up the discretionary would decline first, then housing, then food.
I believe it would also be good to tie the discretionary to some government work and/or training program. This way the leisure side benefit would no longer be an issue, with the transfer of hours being from government program that provided a discretionary allotment to job that provided more money, rather than going from staying home all day to working.
Note that this will never happen since it would require major changes to the tax code (not the least of which would be the complete elimination of all deductions) and major changes to welfare programs--some changes more major than others.
The point I want to make here is that, for all the completely wrong ideas that Republicans put out there, we really do have an issue with incentives for certain very low income individuals and families. At some price point it really is the sound economic decision to not work as much or as hard, and that should never be the case.
Republicans and other pro-uber-wealthy people tend to harp on marginal tax rates as such a powerful incentive for work that nothing else can even begin to matter. They seem to "think" that wealthy people are particularly sensitive to even a small change and that their behavior will (in some bizzaro self-destructive pattern) cause them to want less money if taxes are higher.
There are, however, people for whom their marginal rate does exceed 100%. They are a subset of the working poor. There are other places where marginal rates for poor and middle class end up much higher than those for wealthy people, depending on their exact combination of benefits, welfare and income.
The biggest reasons are welfare and tax breaks that phase out, but which provide nearly equal if not greater benefit than earning the next dollar. Here, conservatives have a real point (though it is never the one they make) which is that for some people in the US there is a negative incentive to work and earn more. Combining this with the benefits of leisure, this group is not only those for whom their marginal rate is > 100%, but also some whose marginal rate is below but close to 100%.
This is something that really could be fixed, and in a way that is humane (as opposed to the GOP's fix which is ending welfare...and giving more money to rich people). This can be done iff earned income -taxes replaces welfare/tax break money faster than 1:1, and really, it should be in the 2:1 range. That is, if someone earns $1 extra, and pays $.25 in taxes then they only give up at most $.25 in benefits.
My preferred technique would be some target minimum "income" level, say $17,000. Anti-poverty programs would essentially guarantee that minimum for everyone. The bottom tax bracket would be 0% up to twice that amount, but welfare benefits would be reduced $.50 for every $1 earned, meaning an effective tax of 50%. Honestly I would rather see the bottom effective rate at something more like 25%, but there has to be a balance between minimum standard of living and not subsidizing people earning more than enough to get by.
The exact mechanism for this could be any of a number of things. I think that splitting it up into separate programs that phase out differently would be good. A housing allotment that started at $500/mo, a food allotment that started at $300/mo, and a discretionary allotment that made up the rest. As income goes up the discretionary would decline first, then housing, then food.
I believe it would also be good to tie the discretionary to some government work and/or training program. This way the leisure side benefit would no longer be an issue, with the transfer of hours being from government program that provided a discretionary allotment to job that provided more money, rather than going from staying home all day to working.
Note that this will never happen since it would require major changes to the tax code (not the least of which would be the complete elimination of all deductions) and major changes to welfare programs--some changes more major than others.
The point I want to make here is that, for all the completely wrong ideas that Republicans put out there, we really do have an issue with incentives for certain very low income individuals and families. At some price point it really is the sound economic decision to not work as much or as hard, and that should never be the case.
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