The Mystery of Workforce Participation

I’m willing to bet that workforce participation in hunter-gatherer societies is darn near 100% for the key demographic of men aged 24 – 54. Ya know? So, if all we want is high workforce participation, all we’d have to do is return to a hunter-gatherer economy.

Men aged 25-54, fully employed

Despite the great progress toward a return to just such an impoverished, backward economy made here in recent years(1), I’m thinking there’s more to it, for example, how many of us are willing to tolerate living in a less than total employment economy for benefits such as cell phones, indoor plumbing and hospitals.

Yet, invariably, any report of a decrease in the percentage of the adult working age population in the workforce is greeted as bad news. This one, for example. And, I hasten to add, it may be. But it might not be.

Question: are the countries more desireable to live in as one moves left to right on this chart? If not, why would one care about workforce participation? Should I prefer to live in Mexico or the Slovak Republic because a higher percentage of males work? Or does pay and opportunity figure into it? 

The implied judgement: Higher and increasing workforce participation = good; lower and falling workforce participation = bad. Is this true? Or only sort of true within a certain range and for certain people?

Wouldn’t it be nice if the percentage of working aged people who no longer worked because they didn’t have to were routinely reported?  Sure, one imagines that many of the people not in the workforce would like to have a good paying job. One also imagines that most of the working age people in or out of the workforce would love to be in a position that they didn’t have to work unless they wanted to. That’s me, for sure – I’d retire in a heartbeat if I could, if, somehow, a few million bucks fell in my lap. Why not? I have plenty to keep me busy and entertained and useful every waking hour. Imagine all the essential blogging I’d do! Or not.

Starting 0ver 20 years ago, it became quite possible, even common, for some mid-level guy or gal in the tech field to get some stock options or make a few astute stock purchases and then, a few years later, find themselves sitting on millions in assets. A lot of those folks looked in the mirror one morning, and thought: I don’t actually have to go to work anymore. And some of those soon didn’t. And more still do every day.

Rather than being some sort of problem, this is in fact the outcome of a free market most to be desired from an individual’s perspective. If I had a few million in the bank-equivelent, think of all the good I could do! Think of all the time I’d have!

Now think of a nation with a growing number of such people, people who are attached in some sense to their money because they did, in some sense, earn it. What a wonderful place that would be! (That’s also the nightmare of statists everywhere, but that’s another story.)  If you were married or the adult child of such an one, you, too, might be able to not work if you didn’t want to – how cool is that? Soon, we’d have a growing pool of people with resources and time. Sure, I suppose, some waste it. But many would not – I fervently believe I would not. The possibilities of local action to make life better are endless!

So, while I’d readily believe that such people make up a small percentage of the decrease in workforce participation, should we not at least break them out of the total? Should we not celebrate them at least as much as we lament those who’d like a job but can’t get one?

On a more serious level, this equating work with prosperity and, ultimately, with personal goodness itself (the hoary Protestant Work Ethic) is merely an example of how economic reporting, reflecting economic teaching, makes things much simpler and black-and-white than they really are (2). Is growing manufacturing output a good or bad thing? How about a falling average workweek? Growing GDP? Falling consumer debt? Are these things, in and of themselves, good or bad? How can you tell? There are situations were they might be good or bad or indifferent. They might be good for some people, bad for others, and indifferent to others or on the whole. And there are plenty of  other cases like this as well. At the very least, the standard disclaimer should say something like: Within a certain range, all other things being equal. Note: all other things are never equal.

Right?

  1. Just think of the low carbon footprint! I quiver!
  2. And that’s even before you reach the Marxist/Bernie level of willful stupid. Nope, here I’m talking about economics as understood by people at least trying to make sense.

Election News, Gell-Mann, and Why I Don’t Watch TV

Stuck in the local Dodge dealer’s service department waiting room while highly trained technicians figure out why they can’t successfully screw some small but essential engine component into place so that the oil stays *in* the engine where it belongs, in under three tries. I’m imagining a seminar being called, with guys in oily blue uniforms sitting at a long oak table, calling each other by their last names: “Mr. Jones, that is a fascinating approach, but, as Mr. Rodriguez here just pointed out, the direct and disintermediated strategy of, and I quote, ‘just gettin’ down there and looking at the darn thing’ runs contrary to the Dodge corporate zeitgeist …”

Something like that. 2 hours later, on our third trip taking the car in over the last 5 days, it seems they might have fixed it. Tricksy, tricksy oil filter seals!

So I got two relaxing hours during which I could check the time every 90 seconds or so and email work that I’d be in late. But even beyond such highlights, which would certainly headline most days, I got to watch about 15 minutes of broadcast news. That I did not promptly kill myself is a testament to my dread of the loss of the joys of heaven and of the pains of hell. After that more than sufficient dose of state-of-the-art intelligence-lowering treatment, I took a walk.

First up, the talking heads went on about the outrage over the killing of that gorilla who made the fatal mistake of having a small child fall into its enclosure. People who have seen way too many movies featuring dramatic rescues are aghast that the zoo, whose primary obligation is to the safety of the *people* visiting, ended up having to shoot and kill the majestic animal.

And it is sad. Not nearly as sad as a small child being ripped or bitten in half, or having his head torn off – things a mature gorilla is entirely capable of doing. So the zoo did the right thing, not having the Mission: Impossible squad or Scotty on the transporter handy to effect a rescue less fatal to the animal.

What made my brain hurt: the entire broadcast team and the experts they called in were obsessing over the *legal* obligations of the zoo. Not once in this 5 minute or so segment did anyone say: too bad we had to kill that gorilla, but, obviously, we had to save the boy, because, you know, the boy is a person and the gorilla is not.

The ongoing efforts to make law the sole arbiter of right and wrong proceeds apace. Rather than recognizing, as everyone before Oliver Wendell Holmes Jr. recognized, that the law is merely a better or worse reflection of a higher order of reality, we instead try to make law, whatever the judges may say it is, to *be* that highest standard.

  • Your personal rights are whatever the judges say the law says they are.(1)
  • The family is not the fundamental unit upon which all societies are built, but just another legal entity – the family is whatever the judges say the law says it is.
  • Human life is whatever the judges say the law says it is, and has whatever value the judges assign to it.

And so on. But we were just getting warmed up. Next came election coverage. I tend to avoid all election coverage because I don’t want to test the limits of my dread of the loss of the joys of heaven, so it has been a while.

In the first segment, the reporter interviewed some Democratic party operative. It was hard to tell which was which, not that it mattered. The first problem: Bernie will not go away and let Hillary be president, even though it her turn! One of the people on screen made sure to let us know that, of course Hillary supports Bernie’s right to keep running just as long as he’d like, provided only that he face reality eventually and support Hillary. Because the big thing,  now that a new standard has been set for rule by presidential fiat, is that we don’t let Trump be president. They didn’t actually say that penultimate part, probably because it’s not in the plans for anybody not on the right team to use all those new presidential powers Obama kept finding under his pillow, left there by the presidential powers fairy. And we don’t want to alienate potential voters.

The second problem is that this whole State Department email thing just won’t go away. They both – the reporter and the operative – really, really just want it to go away, but, darn it all, stuff keeps coming up if they leave any air- or mind-space for it, so they have to say something. What they said was that Colin Powell and Condoleezza Rice also sent email from their personal accounts, and that rules are really unclear, and that, sure, mistakes were made, but everything is cool now, so JUST SHUT UP. (That bold faced stuff was just implied by the context.)

If one of the people on the screen could be said to be in some sense a reporter, it is interesting to note that she raised no objections or even any questions at all about these claims. They were let stand as if beyond question. I bet she got ‘A’s in journalism school. No discussion of what it was, exactly, that Powell and Rice did, and, more important, if they should then have cells adjoining Hillary’s. There are no sunlit lands above, Puddleglum.

This, for me, is step one in fighting off the eternal Gell-Mann amnesia effect (2), where you hear something you know by personal experience is simply untrue, yet reported as if it’s just plain fact. Like anyone who works with high-tech or financial institutions, I’ve run into security requirements. Dodd-Frank, which Hillary supports and thinks doesn’t go far enough(3), imposes massive new information-gathering and reporting requirements on financial institutions, while at the same time broadening the definition of what kind of institutions fall under its purview.

In the modern world, anyone with a job where they touch either intellectual property or confidential personal or corporate data has it beaten into them that they must do that work on a secure corporate machine, using the corporate network behind a firewall. It’s not like the bank or software house wants you to spend a second asking yourself if what you’re working on is important or not – if it’s work, it’s on the corporate servers and behind the corporate firewalls. And don’t imagine we don’t have multiple back-up copies for everything you’ve ever done – we do, stored both locally and off-site, because we want the records if we ever get sued.

Period. No nuance.So easy to understand that millions of gesers like me and Gen-Xers get it. The government rules are the same – official communications are government records, to be communicated and stored via approved government processes and channels.

The very idea that a senior official in government, a lawyer to boot, is to be presumed to not get this is beyond stupid. Just casually start doing business through my own private network outside the firewall? No back-ups? This is even before the interesting phenomenon that getting a Hillary email is the most destructive virus ever devised – why, your system will just DIE and all your data be lost!! Wierd.

This is so preposterously stupid and manifestly dishonest that it should inoculate me against Gell-Mann Amnesia for the rest of my life.

Finally, they got around to beating up reporting on Trump. They can’t spare a few seconds of airtime to question the laughably stupid claims about Hillary’s emails that, in more enlightened times, would be intended to keep her from facing a firing squad. But they got plenty of time to investigate where Trump donated money. Because, I suppose, traitorously criminal behavior by a high-ranking government official who now wants to be president doesn’t sell airtime.

Right after we eliminate compulsory public schools and federally-funded colleges and universities, establishing a free press would be nice.

  1. A hundred years ago, Woodrow Wilson, that titan of progressive enlightenment, found the time in his busy schedule (what with segregating blacks out of the federal government, supporting eugenics, and getting us into a world war he’d promised repeatedly to keep us out of) to opine that the constitution was obsolete. Now highbrow organs like the New Yorker promote this line of thinking, careful to assure us that it’s really just a tune-up. Right.
  2. From the late Michael Crichton’s 2002 essay “Why Speculate?”Media carries with it a credibility that is totally undeserved. You have all experienced this, in what I call the Murray Gell-Mann Amnesia effect. (I call it by this name because I once discussed it with Murray Gell-Mann, and by dropping a famous name I imply greater importance to myself, and to the effect, than it would otherwise have.) Briefly stated, the Gell-Mann Amnesia effect works as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward-reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them. In any case, you read with exasperation or amusement the multiple errors in a story-and then turn the page to national or international affairs, and read with renewed interest as if the rest of the newspaper was somehow more accurate about far-off Palestine than it was about the story you just read. You turn the page, and forget what you know. That is the Gell-Mann Amnesia effect. I’d point out it does not operate in other arenas of life. In ordinary life, if somebody consistently exaggerates or lies to you, you soon discount everything they say. In court, there is the legal doctrine of falsus in uno, falsus in omnibus, which means untruthful in one part, untruthful in all. But when it comes to the media, we believe against evidence that it is probably worth our time to read other parts of the paper. When, in fact, it almost certainly isn’t. The only possible explanation for our behavior is amnesia.
  3. Like progress, one would also like to know, not merely that movement is taking place, but in what direction said movement is going. It’s not that Dodd-Frank doesn’t go far enough, it’s that it doesn’t go at all in the right direction. Smaller specialty finance companies and banks, who played no part in the meltdown, are now having to gather more customer information, which must then be kept confidential, and report on it, which requires investment in systems and people to do the reporting. These are non-trivial expenses, to be borne by those who had nothing to do with the collapse and stand no chance of causing another one. Meanwhile, Goldman Sachs, which actually did play a part in the financial collapse and is as perfectly positioned to profit from the next meltdown as they did from the last, gets to do whatever they want, at least insofar as new regulation is concerned. They supply all the upper management at the US Treasury – out of the patriotic goodness of their hearts, no doubt.

School and Bank Buildings as Marketing

Was struck this morning by how similar old school and bank buildings tend to be. The builders, like all popular artists of the day, wanted to communicate something. Here we look at what that something is.

Here is a not atypical high school building built in California the 1920s and still in use:

Santa Rose HS
“Santa Rosa High School, July 08” by Wulfnoth of English Wikipedia – self-taken photo by the author. Licensed under Public Domain via Commons – http://tinyurl.com/qggwdbv

This is a fairly lovely building (it’s got gargoyles! Too small to see here) built in what was at the time a very rural area about a couple hours north of San Francisco. The marketing messages are: permanence, importance, and wealth. You don’t throw on all the frills and extras unless you’ve got money to spare. Less obvious messages, perhaps, are Tradition – the building reminds one of many noble civic and commercial buildings – and Beauty/Civic Pride – it’s a nice building, especially for a town full of farmers.

These are very important messages to everyone concerned: Parents get the message that they are doing a noble and good thing to hand their kids over to be educated here; teachers are made to feel a part of a noble (and well-funded) effort to make things better, and students should be just a little cowed to go to school in a building much nicer than their homes in almost every case. Perhaps the hope is that they will therefore behave better?  Continue reading “School and Bank Buildings as Marketing”

Student Debt: A Nihilist Speaks

This was making the rounds: Why I Defaulted on My Student Loans. In it, a writer with a master’s degree from Columbia absolves himself from having to repay his student loans.

Here’s a little something I wrote about student loans and other bank subsidies. One might think I’d be more sympathetic with Mr. Siegel, since I agree with him that student loans are a racket. But self-identified nihilists have voted themselves out of the pool – by their own standards, my sympathy would mean nothing. Therefore, I look only at the destructive nature of his attitude – not the default itself, a relatively minor thing, but his petulant sense of entitlement and superiority. What, I wonder, would this man not do to feed his delicate yet zeppelin-like ego? He forgives himself for lying to the banks he borrowed money from, and advises credit card fraud as a viable economic strategy, with little more than a condescending wave of the hand. He follows that up with a smug dismissal of any concerns that universal adoption of his recommended behaviors would cause economic and social chaos. And, unsurprising, he was caught sock-puppetting (is that a word?) his own blog at The New Republic and suspended, but, of course, he’s a fully accredited member of the intelligentsia with a master’s from Columbia he paid for with stolen money, so he gets a pass. Such concerns are beneath the parasitic yet special snowflake we have before us.

See, the moral nicety here is this: that student loans and college tuition are a mutually supporting racket does not provide a presumptive excuse for behaving dishonorably, if, in fact, honor has anything to do with it. Which, for a nihilist, would be a stupid claim to make. But if you did care about honor, you’d have to make a better argument as to why it was OK to steal the Ferrari than you really wanted a Ferrari and deserved it more than the guy who had it (how does one deserve anything besides death and eternal obscurity in a nihilistic universe, anyway? There I go again, expecting a little logical consistency). State U was just so plebeian, and besides, you won’t make the kind of contacts you need at State U to get a job at the New Republic and a pass on lying to and abusing your readers – you know, your employer’s customers.

The most interesting thing about all this to me is the combination of nihilism and narcissism. I suppose in a universe devoid of meaning, you’d just as well be a narcissist as anything else. But at first blush it does seem odd that his narcissism would lead him to write an essay bound to provoke a backlash from, oh, tax-payers, people who pay their debts, people who went to State U, people who didn’t get to go to even State U, baby-popping primitives who don’t even care about the difference between Columbia and State U – you know, all the people it’s perfectly say to insult nowadays. But then again,.what good is being a special snowflake if you can’t laugh at the yokels?

Enough. This man’s name is Legion, and, except for the threat to sanity that his views contain, would be so tedious and yawn-worthy as to make TV look good. Instead, I wondered: is there any relationship in the real world between getting a degree from Columbia and being a good writer? Fortunately, it seems somebody from Columbia is working Wikipedia, which contains long lists of Important People who took classes there.

I was frankly surprised at the number of authors on the list I recognized. Isaac Azimov, Joseph Heller, Upton Sinclair, Hunter Thompson, James Blish, Paul Gallico (Poseidon Adventure – recognized the book, not the author), Langston Hughes, Jack Kerouac, Ursula K. Le Guin, Kate Millett, J. D. Salinger, Robert Silverberg, Mark Van Doren (Great Books guy!), Eudora Welty, Herman Wouk, and Roger Zelazny. And a couple sportswriters, too, although I don’t know how proudly a writing graduate school would embrace them.

Some observations about this list: First, I’m unlikely to know many authors from the last 50 years or so – I don’t keep up with modern literature at all – got better things to read. I’m well aware that means I’ve probably missed so really good stuff, but the needle in a haystack nature of the search coupled with not reading something else makes that a decision I’ll live with. Second, speculative fiction is especially well-represented. Third, despite his high and lonely calling to writer-hood, Siegel isn’t on the list. I’m sure he’ll make the proper authorities aware of this tragic omission.

Started to take a look at the connections these writers had to Columbia, and it was interesting. These observations are not scientific or exhaustive by any means – I got bored. But of the ones I did check or knew about: Most of them did not get a degree in English or writing. Some, like Azimov, took degrees in other fields; others, like Upton Sinclair, dropped out; Hunter Thompson audited a couple courses. Of the ones who did get degrees in English or writing, Communists and other idiots are well-represented. Then there’s Kate Millet, for crying out loud.

Compare this list with a list of great writers who did little if any college, let alone high prestige schools that cost hundreds of thousands of dollars to attend.  Elite colleges are all about making connections. Why the education of a George W Bush is dismissed because he went to elite colleges to make connections, while a Siegel is expecting his misbehavior in pursuing such connections to be brushed away as necessary is a subject for further contemplation.

A Little Math Game: Income Inequality

Some of us routinely, habitually, compulsively do a little math when economic proposals are made. It seems most people, however, are uninterested or incapable of such activities, proving, if we needed proof, that our schools are performing exactly as designed.*

Here we address just the math & economics side of ‘income inequality’.The real issue is philosophic and moral, but that deserves a longer exposition and will have to wait until another day. For now, I note that there are some slippery concepts behind ‘income inequality’, going under the terms ‘fair’ and ‘justice’, that refuse to be defined, or, often, refuse to stick to one definition and play the logic out to the end. Of course, people of good will want everybody to be happy; of course it necessary to have some level of stuff to be happy for all but the most ascetic saints. But it’s a much different argument to say that my not having something somebody else does have – more income, for example – is, in and of itself, a cause of unhappiness, or ‘unfair’ or ‘injustice’. If it were, then my being shorter or less good at math or less physically attractive or female or black or old or just about anything could be seen as unfair or unjust – and we can see where that road leads.

No, while it is certainly the case that those who have much *may* be guilty of greed and pride, it is certainly the case that those who are unhappy merely because somebody has more than they do are guilty of envy. If one has enough food, a safe place to sleep, decent clothes, and enough security to enjoy the fellowship of family and friends, one has enough to be as happy as life in this world allows. The greatest unhappiness I’ve personally come across in my life is sometimes accompanied by poverty, which, in the country, mostly means insecurity – financial, physical – not lack of stuff, but is always accompanied by broken relationships. Maybe we need to love each other first, get to know each other, be there for each other, rather than worrying about who drives a Mercedes and who takes the bus?

Enough. Let’s take a brief look at the economics:

Any money that is used to address income inequality comes from someplace. The most popular idea is to take it from ‘the rich’, which, in practical terms, is defined as ‘anybody who has more money than I do’. ** For this exercise, however, we’ll look at corporate profits – a pretty good stand in, since most of the wealth of the truly wealthy comes from owning businesses.

So, for fun – what if we had a billion dollars with which to address ‘income inequality’? If we focused on the U.S., that would come to a little over $3 per person: $1,000,000,000 / 318,000,000 = $3.15. But, clearly, the people at the top don’t need the extra 3 buck. If we aimed to lift up only the bottom half of the country, we could give a whole $6.30 to each man, woman and child in economic bottom half (however that is defined).

But wait – that’s not what we mean! We want to give everybody in the lower half some real help here, not the price of a short latte and cookie. What about all those corporate profits?

in 2013, corporate profits in the US came to $1.68 trillion. If we gave all of those profits to each person in the bottom half of the US in terms of income, we’d give them each $10,584.

Not bad. A family of 4 in the lower half of income would be up $42K – at least until the wage earners got laid off.

Let’s say you have a retirement fund or 401(k) – even some people in the lower half of income have those. Well, the managers of those retirement and 401(k) funds will all pull their money out of the US economy as fast as they possibly can – and you, the fund beneficiary, would fire them if they didn’t – because the value of their US company holdings would promptly crater, and the value of your retirement fund and 401(k) would promptly approach zero insofar as they are made up of stocks and bonds in companies that don’t make money. Nobody wants to own a company with no profits and no prospects of profits in the future.

OK, too extreme. Let’s say instead, that we seize only another 10% of corporate profits (the government currently takes about 22% in taxes; raising the corporate tax rate to about 30% achieves this). Now we’re able to redirect $168 billion to the bottom 50% – $1,058 per man, woman and child. Not bad, but not earth-shakingly good, either – you can burn a grand so easily now days, it’s unlikely to change your life except briefly and marginally. But, hey – wealth inequality has been reduced.

Tax burden expressed symbolically

Two consequences of this move. First, investment dollars (your 401(k), for example) will move away from the more highly taxed, and therefore less profitable, companies toward instruments (fancy word for things you can invest in) that look to have better returns. One thing this means is that it will become more expensive for those companies to raise money for ongoing operations and new projects (that might employ more people). So – and this part seem really hard for people to grasp for some reasons – economic activity, part of which is paying workers, will tend strongly to decrease.

Think of it as hiking up a hill: everything that weighs anything that I have to carry up the hill slows me down and tends to take the fun out of it and discourages me from even trying. If I like hiking, I might do it anyway even if I have to carry a brick with me; if I have to carry a couple cinder blocks, I might reduce the number or length of the trips, or give up entirely. And carrying anything heavy will slow me down regardless of how I feel about it.

So, say we really want a DMV office on the top of that hill, and believe businesses should carry the bricks and cinder blocks up for us, since they are going that way anyway.  And the businesses might agree, even. But, eventually, it gets old – especially if the people making the demands don’t even know what it’s like to carry blocks up a hill.

Analogy strained beyond its carrying capacity.

Second, and here’s another thing where the common understanding is curiously baffling, businesses will look for ways of doing business that generate fewer taxable dollars.  This gets called ‘tax evasion’ even when it is a perfectly reasonable and legal response to a disincentive. Just like you or me, if we’re deciding between two options and one is cheaper to us than the other, businesses will give a hard look at seeing if they can get by doing stuff that costs them less. For example, at $1 a gallon for gas, I might like the Prius but not get it; but a $4 a gallon (and thousands of dollars in tax breaks and incentives) it looks a lot better. If I choose a Prius under those conditions, am I guilty of tax evasion, since I’m paying much less gas tax than if I bought the Land Rover?

Thus, the people I work for invest in creating leasing companies, because the tax laws favor owning equipment over other types of investments. Is it good that a company whose bread and butter is insurance or tech hardware would want to get into finance instead of investing in what they are already good at? I don’t know, but I do know that taxes are a major driver in this decision.**

The net result of all this is that taxable corporate profits will be less than they would have been had the tax rate not been raised, just like taxable corporate profits are reduced when you buy a Prius (you didn’t know that’s how it works? Somebody somewhere is paying for those subsidies – and trying to figure out a way to reduce their bill.). Profits may still be good; they may still even go up – but they will be less, as companies continue their endless battles to control costs. Taxes are a cost

OK, so our hypothetical family of 4 gets an additional $4,200 per year, based on taking 10% of 2013 total corporate profits and redistributing it to the bottom half of people, however determined. Corporations will give even more attention to seeing how they could reduce expenses.

It just so happens that one of the top expense for most corporations is people. So, by reducing profits through taxation, we would reduce, among other things, the ability of corporations to hire and pay people. Now, we can pout about this, or even convince ourselves that it’s WRONG for corporations to, for example, lay people off when faced with reduced profits – we may even try to enact laws to make it hard to lay people off (we already have – Europe has gone much farther, which is why they have much higher and more permanent unemployment that we do).

But the real price, the one almost universally ignored, is the drag on people who might otherwise want to start or expand their businesses – little companies and big. If you make it harder to pay people or to fire them, you discourage hiring by the guys tinkering in the garage, the dudes mowing lawns and cleaning office buildings, the plumber and car repair people, as well as the Walmarts and the GEs.

They don’t behave like this because they’re evil – business people are no more or less evil than anybody else, in my experience – but because they do the math.

* The only mystery: how did any of us sneak through without hating math? No doubt efforts are underway to fix that systemic flaw – any new educational proposals out there that would dull our minds and crush initiative? That’s what I’m talking about.

** One of the ideas I’ve tried to beat to death here on this blog is the notions that the rich are people with high incomes. Nope – if you are relying on income for your daily needs, you’re a piker. If you need an example, look at your typical professional athlete or lottery winner – huge amounts of income, often, but more often than not, they are broke again within a few years. Meanwhile, how many generations of Rockefellers and Carnegies are still living in big houses at the ends of long drives, more than a century after their forebears assembled their original fortunes? Nope, wealth is owning stuff that produces money. It takes a lot of income and steely resolve to reach that point for us working stiffs. It can be done – it just isn’t, for the most part.

*** This is what is meant by market distortion: instead of people doing business based on what other people want to pay for, they do business in such a way as to best avoid or take advantage of government policies. This could be good, or it could be bad – but it is inevitable once pressure (taxes, regulations, whatever) are applied to buying, selling and making stuff.  What I’m primarily against is pretending it doesn’t happen – or that we understand in advance exactly how it will shake out.  Unintended consequences and all that.

 

 

Houses and Universities: Follow the Money

One problem among us voters is that we have difficult time grasping the concept that we can’t vote for what we’d like to have happen, but instead vote merely for people and measures that may or may not achieve what we’d like to have happen. We don’t get to vote for peace, for example – we just get to vote for people who’s idea of peace might be the Arab Spring and helping Iran get nuclear weapons, alienating allies and emboldening enemies. We don’t get to vote for jobs – we just get to vote for people whose fundamental economic theories are mid-19th century adolescent revenge fantasies dressed up like philosophy for Halloween – trick and treat, where the treat is everything you’ve got and the trick is burning down your village.

This muddle is exacerbated by the often not-so-subtle Marxism that has replaced thought in all of academia and much of real life. Under this theory, progress is inevitable, the result of the dialectic’s inexorable glorious synthesis of the ragged, unjust thesis and its groaning, tattered antithesis. The only question is: are you on the Right Side of History? Which, translated to English from Newspeak, means: do you chose the correct ends? This sort of non-thought has two consequences: first, the means are judged only by if they effect the ends; second, the only way the proper ends can fail to arrive (in a cloud of dialectic magic unicorn faerie-dust) is if Bad People – oppressors – are actively doing something to stop it. Not that they can stop it, really, because the brave new world is inevitable, but those bad-thinking Oppressor McOppressys out there sure make people on the Right Side of History mad!

It makes me a meanie that I care not so much about the nice sounding stated goals which are often completely noble and desirable, but care a lot about how those goals are to be achieved and – here’s where you’ll really make enemies – if the proposed methods are at all likely to get you there. The burning example these days seems to be minimum wage laws. Would I like everybody to live well? Sure! Would I like poor working people to make more money? Seems OK! So the only reason I can possibly have for suggesting an increase in minimum wages is not a good idea is that I’m a Hater! I love looking down on poor people, who are lazy bums!

Right? It can’t be that I take a larger, better informed picture of economics, wherein the apparent short-term gains of some people from an increase in their personal income is offset by a whole cascade of other, less beneficial events, which will result, eventually, in Bad Things for more people than are helped out. Or if I were to suggest that some jobs really might not be worth $15/hour – that’s not because I understand the economics from the point of view of the guy paying the $15/hour, but because I hate the guy who will, in theory, receive the $15/hour.

So, since I’m a hater anyway, might as well point out a couple other areas where good intentions coupled with economic ignorance produced unexpected (by the economically illiterate) results.  Continue reading “Houses and Universities: Follow the Money”

In the News: If You View This Molehill From Exactly the Right Angle…

Record number renouncing American citizenship

From this headline alone, one could imagine the story going any one of a couple different ways:

  1. Fed up liberals moving to Norway or an equivalent and burning their passports in disgust (unlikely);
  2. Rich people picking up their marbles to play someplace nicer to rich people (we might wish this to be true, for it confirms all some of us suspect about the world);
  3. Pouty, fed up right-wingers moving to….? Nope, doesn’t fly at all;
  4. Some combination.

Or ‘Other’ I suppose, but, there’s that ‘record number’, so there must be a *reason* people are renouncing their citizenship in record droves.

So how many people are we talking about here?

That record number is: 3,415.

Oooo-kay. Out of a population of 319 million, slightly more than .001% renounced their citizenship last year. Renouncing American citizenship isn’t quite as rare as dying in a shark attack, but it’s slightly less likely than drowning. It is even a tiny percentage of the 7.6 million American expats, from whom these renunciations are assumed (below) to be coming. On the other hand, 654,949 people became naturalized citizens – nearly 200 to 1 in favor of getting citizenship rather than renouncing it.

So, we’re talking about a tiny trickle of people renouncing their citizenship. Who might these people be? It would seem like #2 is the front-runner. CBS Newswatch tells us:

Avoiding Uncle Sam appeared to be a prime motivator, after a new U.S. tax law was enacted that makes it harder to hide assets from authorities. A survey from deVere last year found that almost four out of five of its clients, who are primarily American expatriates, said they would consider handing in their passports because of the law, which is called the Foreign Account Tax Compliance Act, or FACTA.

“Treasury Department data show that a steadily growing number of individuals have been giving up their U.S. citizenship over the last few years,” said deVere Group (1) founder Nigel Green in a statement. “It can be reasonably assumed that this trend is in direct response to complying with the onerous, expensive and privacy-infringing FATCA, which finally came into effect on July 1 last year.”

While the numbers picked up sharply last year, the trend for Americans handing in their passports has been rising since 2010, the group noted, when FACTA was originally enacted by Congress. The law, which went into full effect last year, requires foreign financial institutions to report the financial holdings of U.S. clients, or else face a 30 percent withholding tax on a range of payments from the U.S.

Note the phrase “harder to hide assets”. You know, these days it’s harder to hide who you’ve been talking to on the phone, where you’ve searched on the web, and what goods and services you’ve legally purchased. Because those things, too, are the business of the government, just as your assets are. Therefore, only criminals and people with bad intent would ever make a fuss over such things. Calling it an intrusion and overreach is merely a dodge.  Without commenting on the merits myself, here CBS does give a hint here where their sympathies lie.

How about the Wall Street Journal, whose sympathies perhaps lie elsewhere? They say:

“Many Americans abroad are finding that retaining their ties is not worth the cost and hassle of complying with the U.S. tax laws,” says Andrew Mitchel, a lawyer in Centerbrook, Conn., who tallies the lists of names released quarterly by the Treasury Department.

He links the growing number of renunciations by U.S. citizens and permanent residents to a five-year enforcement campaign against U.S. taxpayers who have undeclared offshore accounts.

Jumped from almost nobody to a very few people.

The campaign began after Swiss banking giant UBS admitted in 2009 that it had systematically encouraged U.S. taxpayers to hide assets in secret Swiss accounts. Since then, more than 45,000 U.S. taxpayers have confessed to hiding money abroad and paid more than $6.5 billion in taxes, interest, and penalties.

But the campaign also complicated the financial lives of an estimated 7.6 million American citizens living abroad, leading growing numbers of them to give up their U.S. ties. By contrast, over the five years through 2008, fewer than 500 individuals a year on average renounced their citizenship or long-term residency.

Unlike many nations, the U.S. taxes nonresident citizens on income earned anywhere in the world, and U.S. tax liabilities can also apply to children born to Americans abroad. There are only partial offsets for double taxation for people who owe taxes both to the U.S. and a foreign country, and the reporting rules are onerous, experts say.

So, as is so often the case, it’s a little complicated. Swiss banks, which have been involved in a remarkable number of unsavory things for centuries, are involved – no surprise. The kind of people who keep their money in secret Swiss bank accounts – which I’m supposing usually aren’t the kind of people working overseas teaching English, for example – maybe really were doing something illegal and perhaps even wrong objectively apart from the law. But how much sense does it make to have to pay taxes for the privilege of being an American citizen even on money you make – and pay taxes on – in another country? And the government’s insensitivity to and underestimation of the work involved in filling out forms is pretty legendary.

It looks like (hard to be sure) this law did nab some of the people intended. It also looks like a huge number of other people had their lives grossly complicated and made more expensive to no productive end. Renouncing citizenship isn’t even a dodge, since, according to the article, it doesn’t let them off the hook for activities prior to such renunciation.

Tax law tends to be a shotgun, when a target rifle is required. The blast has an annoying tendency to destroy the entire target in order to hit the bull’s eye.

1. The deVere Group is interesting. It started out as a brewery, became a hotel chain, and is now largely a money management firm serving international clientele.